Welcome, everyone. It's great to see so many familiar faces around the room. I'm Briana Gotlin, and I have the pleasure of leading the Investor Relations team at LivaNova. On behalf of the entire team, we are thrilled to have you join us today. This is the right moment to gather our investor and analyst community together to introduce the next phase of LivaNova's journey. We have a great program for you. Our executive leadership team will share our strategic roadmap and long-range financial outlook. We have several members of our team here today conducting a product showcase for you to get more familiar with the products and therapies that LivaNova offers. Before we begin, a few housekeeping items to cover. During today's event, we'll be making forward-looking statements, and it's possible that actual results will differ from our expectations.
For more information, please refer to our Investor Day presentation. Additionally, the discussions will include certain non-GAAP financial measures, such as organic revenue, adjusted operating margin, adjusted EPS, adjusted free cash flow, amongst others. For reconciliation or for more information regarding the use of non-GAAP financial measures, please refer to our presentation. Finally, our agenda. As you can see, we have a wonderful program for you today. We'll hear from leaders across the company, and we'll cover all business units and programs. We'll take a brief 15-minute break about halfway through, and during that time, I'd encourage you to stop by the product showcase in the foyer. We'll have time for Q&A at the conclusion of the prepared remarks, and we expect the event to conclude around 1:00 P.M. You'll be able to ask questions both in the room and online through our webcast platform.
The product showcase will remain open for about one hour after the conclusion of the formal Q&A. The slides from today will be posted at the end of the program, and a replay of the event will be available within 24 hours on our website. I also want to say thank you to everyone who contributed to the event today. So many colleagues across LivaNova have worked together to make this event happen. It really highlights the camaraderie and collaboration that define our organization. We will play a short video clip to introduce you to our new LivaNova identity, as previewed on our earnings call last week, and then we will welcome our CEO, Vlad Makatsaria , to the stage. Please silence your phones and computer notifications at this time. Without further ado, let's get started.
For anyone searching for a new chance, a new beginning, a new trajectory, welcome to LivaNova. Welcome to your new life. At LivaNova, we see the person beyond the condition, the potential beyond the limitations, the life waiting to be reclaimed. We aim to create ingenious solutions that ignite patient turnarounds, striving for days without seizures, minds unburdened by depression, nights of unencumbered sleep, hearts beating strong and steady. Our neuromodulation therapies offer new pathways when other treatments fail. Our heart-lung machines help keep life flowing during the most complex procedures. We do not just treat conditions; we alter the course of lives. From patients seeking answers to impossible situations, to clinicians striving to do their best work, to employees finding a place where they can change the world, welcome to LivaNova. Welcome to your new life.
All right. LivaNova is built on a strong foundation, and we're on the verge of unlocking a truly transformative growth. Good morning, everyone. It's great to be here with you in person in this room, and welcome to all of you joining us online. I'm Vlad Makatsaria, CEO of LivaNova, and I'm thrilled to be here today. It's an exciting time for LivaNova. I'm proud of what we've achieved over the last couple of years. I'm energized by the opportunities ahead, and I'm confident in our ability to execute. I believe that by the end of today, you will share that confidence. Here's what you can expect from us over the next five years. Our long-range plan delivers steady revenue growth in the core, with acceleration in obstructive sleep apnea. In cardiopulmonary, we are the market leader, and we will continue to grow faster than the market.
This growth will be driven by continued Essenz replacement cycle and market share gains in consumables, as well as the upcoming launch of our new generation oxygenator. In epilepsy, where the market is significantly underpenetrated, we expect reliable, profitable growth supported by strong clinical evidence, commercial execution, and accelerating innovation. In OSA, we are poised to deliver rapid growth as we scale this de-risked and differentiated business. In difficult-to-treat depression, or DTD, we have potential upside to our plan, gated by the CMS reimbursement decision. Bottom line, with disciplined capital allocation, LivaNova is well-positioned to deliver long-term value to our patients, our customers, our colleagues around the world, and, of course, our shareholders. My confidence in delivering on this plan comes from the quality of our leaders, who demand accountability and who have nurtured a can-do attitude and culture at every level, everywhere we work.
This team is in the room today, and I'm proud and honored to be part of this team. It brings some distinctive key strengths to LivaNova. First, it's new. It's fresh, energized, unafraid to challenge status quo. Second, it brings deep expertise, and it's a good blend of external leaders coming from some of the top names in the medtech industry, alongside internally developed talent who know our customers, our products, and markets inside and out. Third, it's a team that works exceptionally well together. In even a short period of time, we've built strong trust, alignment, and our recent successes are a direct reflection of that. Today, you will hear from some of them. Phil, our Chief Strategy and Corporate Development Officer, will take you deeper into our portfolio strategy.
Franco, who leads our Cardiopulmonary business, and Steph, our leader of Epilepsy, will show how market leadership, commercial execution, and innovation are driving growth. Ahmet, our Chief Innovation Officer, will take you through the transformational opportunity ahead of us in obstructive sleep apnea. He will share some incredible new clinical data that has never been shared before. He will also talk about our upside that we preserve in difficult-to-treat depression. Alex, our CFO, will outline how we expect to sustain a strong financial profile going forward. Before I turn it over to the team, I wanted to share my story. Despite joining as CEO only 18 months ago, my connection to LivaNova is actually much longer and deeper.
About 30 years ago, when I was just starting my career as a sales rep in the cardiovascular business at Johnson & Johnson, I was in an operating room watching surgeons fight for the life of a newborn, just hours old, born with a congenital heart defect. As the surgeons rebuilt her tiny heart vessels, aided by devices that maintained blood flow and oxygenation while her heart was still, I was in the room. Those devices were early generations of the cardiopulmonary products LivaNova provides today. I actually stayed in touch with the family of that girl ever since. Every Christmas, I still get a card, and that baby is now a healthy woman, Anna, with children of her own.
For me, Anna's story, it's not it's a reminder of why I do what I do, why all of us do what we do, to give people not just more time, but a chance for a full and joyful life. To embody this purpose, we recently unveiled LivaNova's new vision: changing the trajectory of lives for a new day. It's not just about treating conditions. It's about setting patients on a new path for their future. What is LivaNova? Who are we? For those of you newer to the story, let me give a quick snapshot of that. LivaNova is a global medical technology company with nearly five decades of market-leading positions in the areas that we serve. Our cardiopulmonary business provides the heart-lung machines, oxygenators, and other technologies that make life-sustaining open heart surgery possible.
Today, our cardiopulmonary portfolio supports more than 70% of all open heart procedures performed worldwide. It is a remarkable scale and impact. Our epilepsy business delivers neuromodulation therapy for patients with drug-resistant epilepsy, using small implantable devices that stimulate the vagus nerve to help control seizures when medications alone are not enough. VNS therapy has transformed the lives of more than 175,000 patients and their loved ones. Many of these patients benefit from the therapy throughout their lives. Our impact is global, and that diversity drives a balanced revenue performance both across businesses and geographically. Behind all of that are more than 3,000 colleagues around the world, around 100 countries across the world, united by the purpose to deliver innovation, reliable solutions that change life. Over the past 11 quarters, we have made some strong progress in our financial performance, our execution, innovation, and talent.
We delivered 10% organic growth on the revenue side and 17% adjusted EPS growth. We generated approximately $400 million adjusted free cash flow. Now, on the operational side, we've expanded oxygenator manufacturing capacity by nearly 25% over the last three years, and that allowed us to grow our market share in disposables. We also successfully launched Essenz, our new generation heart and lung machine, a major milestone that strengthened our technology leadership and has transformed the growth profile of our cardiopulmonary business. We concluded our three-year Core VNS study, the largest real-world evidence study in neuromodulation for epilepsy, demonstrating the strength of VNS Therapy across different seizure types. On the innovation front, we achieved critical milestones with our PMA submission of a truly differentiated Proximal Hypoglossal Nerve Stimulation technology for the treatment of obstructive sleep apnea.
Finally, from the talent perspective, we've strengthened our organization by changing more than 40% of direct and above leaders across the team, bringing top external expertise and promoting internally. These achievements demonstrate our ability to deliver results across every part of the business. While today's focus is on showcasing LivaNova, our vision, our leadership, and our execution roadmap for the next five years, it's also important to understand what are we building on. From 2019 through 2022, LivaNova reshaped its portfolio. We made a deliberate choice to divest or exit some low-growth cardiovascular assets and to refocus our investments on a set of promising early-stage portfolio opportunities. That shift in strategy led to a transition period that slowed down the pace of our core innovation efforts. In recent years, we refocused on the core innovation and on the areas where we have a clear right to win.
Let's talk about that. As part of this refocus, in 2024, we completed a wind-down of the heart failure program and advanced circulatory support business. These actions reflect our commitment to regular review and optimize our portfolio, and they allowed us to reallocate financial resources, leadership attention, and operational capacity back into our core businesses. This renewed focus, combined with targeted strategic investments, talent upgrades, and improvements in operational excellence, has led to a recent track record of results that we're all very proud of. This is the foundation for our next chapter. As we continue to reinvest in the core, we're also leveraging our neuromodulation expertise to commercialize OSA while preserving the upside to enter the DTD market. As a team, we're building the company with an accelerated and sustainable trajectory of top-line and EPS growth.
We're doing this by expanding our leadership in the core while getting into bigger, higher-growth and more profitable markets. The leadership position we hold in both epilepsy and cardiopulmonary gives us a strong foundation, one that provides predictable growth and consistent cash generation. This sustainable top-line growth and margin expansion we're driving in those two businesses enables us to invest in a couple of important ways. First, it allows us to maintain and grow our leadership in our core markets. This means investment in supply capacity, innovation, international expansion, and clinical evidence generation. At the same time, this strength allows us to invest in our transformational pipeline, the higher-growth, more profitable markets like OSA and DTD. Over time, these programs will shift LivaNova's overall weighted average market growth upward, positioning us for sustained acceleration.
By growing this, by grounding this high-growth innovation investments in markets and products where we already have a clear right to win and where we can leverage our existing capabilities, we are creating a self-reinforcing flywheel. It's a flywheel that builds on our strengths, enables us to establish new markets and leading positions in those markets. It accelerates our ability to deliver meaningful value to patients, providers, to our colleagues around the world, and ultimately to our shareholders. What does that mean from a financial perspective? Over the next five years, we will achieve high single-digit plus revenue growth with acceleration in the latter part of the plan. Over the next three years, we will continue to drive our leadership in the core and invest behind OSA in a responsible manner. During this time, we're committed to maintaining annual operating income margin above 20%.
As OSA scales, this will accelerate to reach high 20s by 2030. This results in a low double-digit to mid-teens EPS CAGR through 2030, with an acceleration in the latter part of the plan. Let me be very, very clear. Our destination is not 2030. We're transforming the profile of LivaNova to a benchmark medtech company for a long term. Now, before I turn this over to Phil, I want to take a moment to introduce him. I've had the privilege of working with Phil in Asia, in the U.S., and everywhere in between. Phil has had a tremendously successful career in strategy and business development across Johnson & Johnson. He's a strategist, he's a builder, and he's a great teammate. Now, as our Chief Strategy and Corporate Development Officer, he's helping guide LivaNova's future. Please join me in welcoming Phil on the stage.
Thanks, Vlad. Let's take a look at our portfolio strategy and how we are well-positioned to achieve the long-term outlook that Vlad shared. Our strategy starts with where we play. Today, LivaNova has leadership positions in two attractive markets that currently grow at mid-single digits. Our strategy is anchored in winning in those markets to sustain above-market growth while also entering higher-growth segments grounded in a clear right to win. Our core, while unique in terms of the customers and patients they serve, has something in common: high unmet needs with significant opportunity for innovation. Let's start with epilepsy, a $700 million market today with additional growth potential given the low penetration of non-drug therapies and significant delays in the care pathway to get to advanced treatment options.
In fact, the current penetration of advanced therapies in drug-resistant patients is only 10%, and the average patient, despite being drug-resistant after failing two medications, currently takes 15 years and six failed medications before getting to an advanced therapy. Demonstrating better clinical outcomes, launching innovation that removes barriers in the care pathway, and being proactive in monitoring the landscape of external technologies that could tuck into our existing infrastructure are all levers for LivaNova to address these critical unmet needs and accelerate market growth. In cardiopulmonary, our over $2 billion global market has well-defined unmet needs around better perfusion outcomes, data and insights to inform clinical decision-making, and consistent and reliable supply of products. Investment in manufacturing capacity, product innovation like our next-generation oxygenator, and software-based upgrades to our Essenz platform will allow us to address these unmet needs and continue to grow our market-leading position.
The next phase in the LivaNova strategy will be our entrance into the high-growth obstructive sleep apnea market. The neuromodulation market for OSA has rapidly grown to reach $1 billion, and we expect double-digit growth to sustain over the long term. This growth will be driven by increased awareness and rates of diagnosis for OSA, as well as increased penetration of neuromodulation solutions. Today, less than 10% of patients who fail first-line OSA therapies receive an implant. The market has remained underpenetrated in large part due to the limitations of currently available technologies when it comes to treating difficult patients. Our ability to treat more challenging patients, such as those with higher BMI, more severe OSA, and other physiologic constraints like complete concentric collapse, will differentiate us in this market. Beyond OSA, we also have significant upside potential with our difficult-to-treat depression program.
VNS in depression holds promise to address critical unmet needs around the lack of a more durable and efficacious solution in the most severe patients. Receiving a positive coverage decision from CNS would unlock another billion-dollar plus high-growth addressable market. Longer term, LivaNova has the capabilities to expand into additional attractive neuromodulation and perfusion adjacencies with a strategy grounded in our right to win and a unique ability to create value. Let's double-click on our right to win in these higher-growth neuromod markets like OSA and DTD. We can leverage the competencies developed by our epilepsy business to both accelerate growth and shorten the path to profitability. Our product development expertise in implantable pulse generators and lead design, a shared cloud platform to enable digital and remote capabilities, and the clinical and regulatory expertise for Class III implantable medical devices are unique innovation differentiators for LivaNova.
Our expertise in neuromodulation supply chains will enhance our profitability and reliability through know-how and scale. Our global footprint with strong commercial operations and OR support functions will be leveraged to ensure the successful launch and scaling of both OSA and potentially DTD. Our depth of experience in creating referral pathways between distinct medical call points like neurologists and neurosurgeons in epilepsy will allow for accelerated market growth. The market access capabilities to ensure coverage and achieve sufficient reimbursement for implantable neuromod technologies are critical to maximize value creation. As we expand the portfolio and accelerate our growth, the strength of our innovation engine will play a critical role. Over the last two years, we have completely overhauled LivaNova innovation from a process, governance, operating model, and talent perspective.
These changes include hiring 15 new senior leaders into the innovation community, creating a core team model that ensures clear project-level accountability, and establishing a distinct technical governance that is separate from the business governance in order to enhance the level of scientific rigor in our innovation decision-making. Given the life cycle of medtech innovation, we will see much of this value of these changes in the robust pipeline of future launches. That being said, we have seen some early proof points of the results of these changes. Let's take AI. We are at the forefront of medtech and deploying agentic AI in product development, using artificial intelligence to write much of the code for our next-generation VNS. This has a dramatic impact on both the speed and efficiency of our development process. We have also established a single shared cloud platform across the entire portfolio.
This allows us to advance our data strategy and increase our innovation cadence of software and digital health solutions. The output of these changes is transformational. We will launch seven products over the next three years and dramatically improve our freshness index, which is the innovation metric we use to determine the percent of sales coming from products launched in the last five years. We will exceed 40% by 2030, which positions us as a benchmark innovator compared to our medtech peers. We will do all this while maintaining a high single-digit to low double-digit investment in innovation as a percent of revenue. In addition to internal innovation, we see inorganic innovation as a complementary approach for the long-term health of LivaNova. Over the last year, we have focused on evolving the capability.
Learning from past outcomes and benchmarking against industry standards, we have made changes in the governance, processes, role clarity, and talent of not only the corporate development function, but of all of the functions involved in assessing external opportunities. Our broader focus on culture that Vlad described will also impact our ability to both make the right choices and integrate effectively. Our disciplined corporate development approach will balance both strategic fit and financial return and evaluates opportunities against four main criteria. Each prospect must align with our prioritized strategic objectives, address significant unmet needs for key stakeholders, leverage internal competencies and our right to win, and generate attractive risk-adjusted returns. All of this is done within the context of our LivaNova capital allocation framework, which Alex will describe later this morning. What is our roadmap over the next few years to enable this strategy?
Our first priority is to maximize our core businesses to ensure the durability of our leadership positions, continue cash generation, and provide a stable platform to enable investment. Key priorities include advancing product development and enabling key launches, expanding manufacturing capacity to match demand, and investing to sustain commercial excellence. We'll also be assessing tuck-in M&A that will reinforce our leadership in our core businesses. These investments in the core will allow us to retain our market-leading positions and deliver organic mid-single digit plus growth on the top line. Our second priority is to enter the obstructive sleep apnea market with our differentiated proximal hypoglossal nerve stimulation device. We have submitted our PMA and await FDA approval while we continue to develop innovative product features and publish clinical evidence supporting the differentiation of this novel therapy.
The introduction of the fast-growing OSA business will meaningfully contribute to sales by 2030, thereby raising our enterprise growth to high single digits or better. Our final priority is reaching clarity with our difficult-to-treat depression program. We have initiated the process for reconsideration and continue to advance our efforts with CMS. By doing so, we maintain the option for a second transformative growth business that would leverage our existing depression infrastructure as well as our strong capabilities across neuromodulation. Given the unique competitive positioning of the asset, we will be able to control how we scale and invest alongside of growth. We believe that expanding our neuromodulation portfolio will create significant long-term value for LivaNova shareholders and further accelerate growth by 2030.
What I hope to leave you with is that, one, LivaNova is in attractive markets today with a path to enter additional high-growth markets with significant unmet need. Two, our leading capabilities in Neuromod give us a right to win in these high-growth segments. Three, we are building a strong innovation engine, both internal and external, that will be a key enabler for our future growth trajectory. Four, we have a clear path to transform the growth profile of LivaNova. This strategy all starts with a strong foundation in our core businesses. I cannot think of a leader that better embodies the depth of expertise we have in our core than Franco Palletti. His customer intimacy, market insights, and cross-functional expertise are what set him apart.
With over 40 years of experience inside our business, he started as a product development engineer and rose all the way up to President of our Cardiopulmonary business. It's my pleasure to welcome Franco to the stage.
Thank you, Phil. Thank you very much. Good morning, everyone. It's a pleasure to be here with you today. I'm proud today to share how our Cardiopulmonary segment is uniquely positioned to continue a growth trajectory while delivering durable value for shareholders. We are the clear market leader in the Cardiopulmonary segment. We believe that cardiac surgery remains the gold standard for treating the world's most critical cardiac disease. As the market leader, we play an essential and established role in delivering these life-saving therapies to patients everywhere.
Second, we have some notable growth drivers across our portfolio that will enable sustained above-market performance, the adoption of our new heart-lung machine, Essenz, across the globe as the standard of care, market share gains in our consumable used to support cardiopulmonary bypass procedure, and a new revenue stream in hardware, software, and service to leverage the breadth of our global installed base. Third, due to our scale, we have the ability to maintain our recent track record of delivering operating leverage, margin expansion, and increased cash generation. Now, let me spend a few words about what is cardiopulmonary bypass. Maybe some of you may know people who underwent cardiac surgery. For those new to the space, let me explain what does it mean. Cardiopulmonary bypass is a life-saving perfusion technique that temporarily takes over the function of the heart and lungs during cardiac surgery.
This is essential for surgeons to perform complex procedures like coronary artery bypass grafting, surgical heart valve repair and replacement, and also congenital heart defect repair. The procedure will allow the surgeon to operate in a still heart and utilize sensing and cooling to ensure patient safety before, during, and after the case. Even more important, it keeps the patient alive during surgery, supplying oxygen and removing carbon dioxide from the body tissues and from the organs. More than 5,000 hospitals around the globe perform on-pump cardiac surgery on about 1.5 million patients a year. More than 14,000 installed heart-lung machines enable this life-saving procedure. The number is only growing. In recent years, the global cardiopulmonary market has experienced an accelerated growth, surpassing its historical low single-digit run rate. This growth is driven by a few key factors.
First, the global population is getting older. As the population ages, the prevalence of cardiovascular disease continues to rise, leading to sustained growth in cardiac procedures. Second, patient complexity is increasing. Higher rates of comorbidities and concomitants result in an increased demand for surgical approaches that require cardiopulmonary bypass. It's important to know that cardiac procedures post-TAVR implant—TAVR stands for Transcatheter Aortic Valve Replacement—are increasing rapidly, including surgical replacement of the initial TAVR valve. Finally, global access to cardiopulmonary bypass is expanding. This is driven by improving healthcare access and expansion of cardiac care infrastructure in developing markets. This is driving greater procedural growth. This underlying procedural growth, combined with price increases, has led to a durable mid-single digit growth cardiopulmonary market. Now, LivaNova is the leader in the cardiopulmonary market because of our 50 years, more than 50 years' legacy of innovation.
We have consistently upgraded our portfolio, improving the practice of perfusion and elevating patient care. The strength of our customer-focused organization around the globe is another important ingredient. LivaNova customers value our consistency and reliability in supporting this critical procedure. While other manufacturers have de-emphasized their focus in serving this market, LivaNova has remained committed. In doing so, they have earned the trust of our customers. Due to this market leadership and scale, we have a very well-diversified geographic and product mix in our business. We derive revenue relatively equally across the U.S., Europe, and the rest of the world region. We have four key product segments, each of which has been driving our recent growth and market outperformance. The results speak by themselves. For 11 straight quarters, we have delivered double-digit revenue growth.
Double-clicking on our portfolio, we have a leading position in nearly every single major cardiopulmonary bypass segment. In recent years, we have continued to increase our market share in heart-lung machines and in consumables, driven by the successful launch of Essenz around the world, including the most recent launch in China, but also with market share gains in consumables. We were able to respond to the higher market demand that outpaced our competitor ability to supply. The result is, over the last two years, we've become the leading supplier of this critical component. In autotransfusion, we have a strong leadership position in the cardiac segment. This is our focus. Our focus, again, is on driving therapy adoption in the emerging market. This will allow the continued share gains. In cannula, we have a smaller footprint but a very well-differentiated portfolio with our specialty cannula.
As we register our full portfolio of cannula globally, we have the opportunity to continue the growth. What can you expect from LivaNova Cardiopulmonary in the next five years? Our strategy is anchored on three major pillars of growth. First is consumable share gains. We will achieve it through oxygenator capacity and innovation. We are focused on expanding our oxygenator supply, targeting a step-change improvement in 2026 and sustained growth through 2030. We also anticipate the launch of our next-generation oxygenator by 2028, providing us an opportunity to further differentiate LivaNova in the category. The impact will be share gains of approximately 800 basis points by 2030. Second is to continue the Essenz upgrade cycle. Driving Essenz market penetration is the cornerstone of our long-term strategy. It's a multi-year conversion, which provides a recurring revenue stream due to our large installed base.
So far, the upgrade cycle in the developed market has exceeded our expectation. Additionally, we are seeing early success after our August launch in China. The final pillar is the leveraging of our installed base of Essenz to generate additional recurring revenues. We will introduce new hardware components like a new air manager, new intercooler by 2026. The new software and algorithms will improve outcomes and workflow, all of which will continue to drive above-market growth. These pillars will strengthen our market leadership and deliver superior value to our stakeholders. In doing so, we will deliver mid to high single-digit revenue growth with higher gross margin and a significant increase in our profitability. I would like to share more detail on each of these pillars of our strategy. Our first key growth pillar is investment in our CPB cardiopulmonary consumable, primarily represented by oxygenator.
Driven by a commitment to innovation and operational excellence, our strategy for oxygenator growth is anchored on both capacity, expansion, and innovation. Beginning in 2025, we initiated a significant investment with the addition of a new manufacturing line dedicated to inspire our flagship adult oxygenator. By the end of 2030, we will expand our capacity by 60%. This expansion marks the first step in a multi-year plan that will culminate with the addition of a new manufacturing line to produce our state-of-the-art oxygenator in 2028. The next-gen oxy will be differentiated through best-in-class performance thanks to its high gas transfer capability, very low blood resistance, and solid platelet preservation to reduce blood trauma to the patient. You may visit our product showcase to view the prototype directly. We expect this best-in-class product to drive an ASP premium due to the innovation and improved clinical benefit.
While we are forecasting an 800 basis point increase in share gains due to these investments, we will have the capacity to get over 60% of the total global oxygenator market by 2030. Before I get to the next pillar of our strategy, I want to take a moment to introduce the Essenz perfusion system and why this is a critical part of our cardiac suite and a key driver of value for the company.
The world of perfusion is entering a new era where data and data integration take a central role in enabling patient-tailored care. Essenz Perfusion System supports the perfusionist and the entire heart team in delivering truly patient-centric perfusion therapies and continuously improving clinical practice by combining a state-of-the-art heart-lung machine, an embedded patient monitor, and accurate sensing technology, including the Essenz in-line blood monitor powered by B-Capta technology, all supported by an experienced sales and service team. Essenz is built on proven S5 reliability and a reputation for safe CPB management. It offers embedded backup solutions, state-of-the-art safety precautions enabling the delivery of life-saving care to patients, automated sensor checks, and an integrated warning system. A combination of accurate sensing technology, the MAST-mounted pumps, and embedded clinical logic allows perfusionists to deliver patient-tailored perfusion therapies, such as goal-directed perfusion. Continuously recorded data and events enhance traceability. The system combines advanced technology and an intuitive user interface, facilitating a short learning curve for users.
Essenz is a fully integrated system, flexible and versatile to adapt to the individual needs of patients, workflows, and users, while the advanced cable management and centralized cockpit create an efficient experience. Co-created with more than 300 perfusionists worldwide, Essenz perfusion system is designed to address and anticipate the needs of the new era of perfusion. Essenz perfusion system: elevating perfusion into a new era.
The video brings the Essenz system to life, and you can see the value it creates for our customers. As I mentioned, we expect 100% of our new heart-lung machine sales to be Essenz by the end of 2027. This will continue to drive cardiopulmonary revenue growth over the next couple of years as we increase the mix of Essenz placement from 60% in 2025 this year to 80% next year and finally 100% in 2027.
We are mindful that this dynamic creates tough year-over-year comparables, and we will not capture the same level of price mix effect. As such, we project HLM growth of double digits in 2026 and mid-single digits in 2027. Nonetheless, we will also have opportunities to improve margin with initiatives that support a customizable version of Essenz for a more price-sensitive market. Finally, our strategy is focused on our ongoing hardware and software releases and adoption of new algorithms, which will complete our vision of a total perfusion solution. We are the partner of choice to perfusionists. Today we sell products. We sell heart-lung machines, oxygenators, custom pack, cannula, outer transfusion.
Over the next few years, we are planning to enhance our Essenz system with major hardware upgrades, with the introduction in 2026 of both next-generation air manager, which is a system to balance gas mixture in the oxygenator during the case, and the next-generation intercooler, which is a device that controls the body temperature again during the case. This new technology falls naturally into the footprint of our large installed base of Essenz heart-lung machine. In addition to the hardware upgrades, in the next three years, we will also add clinical software release with algorithms integrated to improve functionality for our customer and patient outcome. In the future, we will deliver a total perfusion solution that is even more holistic and interconnected offering for our customers. This solution, built around the core Essenz platform, will integrate advanced software and hardware, enabling clinicians to achieve more predictable and superior patient outcomes.
Its modular design enables the hospital to unlock clinical and economic value through target upgrades such as automation, enhanced monitoring, and enablement of qualitative analytics. Additionally, we are incorporating perfusion algorithms, for example, the Ranucci algorithm, that will reduce post-operative complications for patients. Increasing hardware and software attachment through our large HLM installed base will help increase the recurring revenue mix of our business. This will also enable pull-through sales from incremental hardware upgrades, consumable, and service. Now, from a financial perspective, the cardiopulmonary business is leveraging its global installed base, robust pipeline, and technological ecosystem centered on the Essenz platform to drive profitable growth and margin expansion. We will drive mid to high single-digit revenue growth, which is higher than the underlying market.
We are focusing strategic investment in manufacturing capacity for oxygenator, the launch of the next-generation products that are designed to meet evolving market demand and reinforce our ability to increase our market share. We will expand gross margin by more than 100 basis points through cost initiative, pricing optimization, and growth of service and software offerings. We will expand adjusted operating margin by over 300 basis points by 2030. Again, we will launch four new products over the next three years, which will drive a cardiopulmonary freshness index of approximately 20% by 2030. Now, in summary, I would like you to remind a few points. The first one is that we are a market leader in the cardiopulmonary segment. We believe that cardiac surgery remains the best choice for cardiac disease treatment, and this position will help us to achieve our objectives.
Second, we have three notable growth drivers across our portfolio that will enable sustainable market performance: adoption of our new heart-lung machine, Essenz, market share gains in our consumable, and new revenue stream in hardware, software, and service that leverages the breadth of our installed base. Last, due to our scale, we have the ability to maintain our recent track record of delivering operating leverage, margin expansion, and increased cash generation. Thank you very much for your attention. As someone who spent more than four decades in this industry and with this company, I've never been more excited about the future of Cardiopulmonary LivaNova Cardiopulmonary business as I am now. Before closing, I would like to introduce my colleague, Steph Bolton, who will discuss our tremendous opportunity in epilepsy. Steph has over 20 years' experience in the field of epilepsy.
She has spent nearly a decade and a half at LivaNova in a variety of regional and global commercial roles, driving collaboration and operational excellence. Please welcome Steph. Thank you.
Thank you, Franco. Hello, everybody, and welcome. It's a real privilege to be with you today to share how our epilepsy business is both performing and also positioned to deliver not only clinically meaningful impact but scalable growth and sustainable financial value. Let's start with the epilepsy summary. Drug-resistant epilepsy patients face significant unmet medical need that corresponds to a large and growing but highly underpenetrated market opportunity. What do we do? We provide a life-changing therapy for patients that is both effective and long-established as the least invasive option for patients with DRE.
LivaNova is very well positioned, having built a strong product and global commercial foundation over 30 years as the leading company in drug-resistant epilepsy. Today, I'll walk you through our drivers for growth, our latest strong real-world evidence, and our market access initiatives, as well as our exciting innovation agenda, all built on a foundation of disciplined execution and scale with industry-leading profitability. If you take two things away from this slide, take away the fact that there is a high unmet need and we have several levers for growth. Let's first start with the definition of DRE. The reality is that over 10 million people worldwide live with DRE. If we look at the pie chart, we can see that drug-resistant epilepsy are patients who continue to have seizures despite trying at least two appropriate and well-tolerated anti-seizure medication.
This definition reflects decades of research showing that once two drugs fail, the chance of achieving seizure control with additional medications is very low. Despite the introduction of many new drug therapies over the past several decades, roughly one-third of patients still live with drug-resistant epilepsy. This unmet need has left over 10 million people globally living with drug-resistant epilepsy, over 1 million right here in the United States, more than 2 million in Europe, and significantly more around the globe. Not only is the number of people living with drug-resistant epilepsy significant, the untreated population continues to grow each year. Globally, nearly 900,000 new patients are diagnosed with DRE annually, yet fewer than 10%, around 50,000, receive advanced treatment. This gap underscores a profound unmet need and a major opportunity to make meaningful impact.
In 2025, the drug-resistant neuromod market is $700 million, and we're over 80% of this. Over the next five years, we expect significant market innovation to challenge this treatment gap and drive market growth. We'll see earlier, more accurate diagnosis with tools that enable early detection, wearable seizure monitoring devices that provide continuous insight for early intervention. We'll see expanded personalized treatment options and biomarkers that will enable a tailored treatment plan. We expect to see access improve globally. Telemedicine services providing expert consultations remotely will improve access for patients, especially in underserved areas. Lastly, we expect to see a transformation of public perception, awareness campaigns that will continue to shift the public view and reduce stigma and empower patients to seek treatment. All of these factors will tip the risk-benefit balance and drive adoption towards advanced therapies.
We will lead this charge with our Bluetooth device and our digital health platform, and I'll come to that later in the presentation. The unmet needs really show up in the care pathway, with many studies highlighting an average time to advance treatment is more than 15 years and more than six anti-seizure medications. These delays in care have significant consequences from risk in injury, a reduced treatment effectiveness, and an increased mortality by 2x. The outcome of these unmet needs is a highly underserved patient population, with only one in 10 globally ever receiving a non-pharma therapy to address their drug-resistant epilepsy. Just imagine for a second you're the patient. You've had 15 years of trying one medication after another, and yet you're still continuing to struggle with seizures. You can't drive.
You have to rely on others to make it across town or perhaps even another city for treatment. Or maybe you're a parent of a child with DRE, taking multiple days off work in order to manage that chronic neurological condition. It's tough. There's no surprise that there's a gap in care. Let's hear from Dr. Hidalgo. She is the pediatric neurosurgeon from NYU on the realities of the care pathway and how VNS Therapy fits into her pathway.
The pathway to epilepsy surgery can be often very long and hard to us. This means that we have more and more children and increasing prevalence of children and adults with drug-resistant epilepsy. There's a real treatment gap.
When a child is diagnosed with drug-resistant epilepsy, it is a multi-step pathway until this child can be really evaluated for epilepsy surgery and have a recommendation for epilepsy surgery and meet the surgeon. You can imagine that there are many, many children worldwide in the U.S. that still have not been diagnosed and that have not been treated accordingly. Those are children that still have seizures and that have daily seizures often and that have all those cognitive impairments that you have when you have many seizures, that this has an impact on the family, on the family life. At the end of the day, those are children that cannot live this to their fullest extent, the life that they would be able to if they would have less seizures or no seizures.
Having a treatment gap here is really something that hurts children and in their development, in their cognitive development, but as well in their social development and in the development of those families of having a fulfilling social life. VNS is one of many procedures that we perform here at NYU, and it is a procedure that we are very familiar with. We do it on a regular basis, and we can inform the families very well what they can expect during their journey into having a VNS implanted. What you often hear from families is, "Oh, afterwards is, oh, I wasn't aware this was going to be so easy.
I wasn't aware that the recovery would be so quick." It is nice to see those families come back after two weeks and tell us that their kids have been back to school within days and that they wish they would have done the procedure earlier.
You heard from Dr. Hidalgo in terms of how VNS fits into her treatment paradigm. Let's discuss in more detail how the therapy is uniquely positioned to address the market unmet need. VNS is a simple outpatient procedure with an implanted pulse generator in the chest and a lead that's placed outside of the brain. VNS harnesses the body's own neural communication pathways to reduce seizure activity through the vagal-afferent network. This network effect is widespread, modulating multiple brain regions, which makes it an obvious modality for treating conditions of the brain.
What does this unique value proposition mean for patients? Firstly, VNS significantly reduces seizure frequency and severity, and for some patients provides seizure freedom. Our latest and largest real-world evidence study shows that VNS delivers over 75% median reduction across all seizure types. In addition to seizure benefits, VNS demonstrates significant quality of life for both patients and caregivers, including cognition improvement, mood, alertness. This powerful effectiveness is paired with a low-risk profile. A simple extracranial procedure offers these life-changing results. Whilst other procedures may offer similar outcomes, they require an invasive procedure. This compelling value proposition really resonates with patients. 94% of them wish they'd known about VNS sooner. We as a company have achieved a huge amount over the last three decades. VNS Therapy is the most widely utilized treatment for DRE across the globe.
We are the largest global leader with the largest commercial team purely dedicated to improving the lives of patients with drug-resistant epilepsy. For more than 30 years, VNS Therapy has been a trusted partner for physicians and a proven treatment option for patients living with DRE. We have transformed the lives of over 175,000 patients across 80 countries, many of whom receive a lifetime of care through our replacement cycles. As the leader with the largest commercial field force in drug-resistant epilepsy, we are committed to delivering solutions to address this unmet need. Our global scale positions us very well to explore additional options for patients living with DRE as tuck-ins to our current portfolio. What does the business look like today? We are entering the next five years from a solid position of strength.
Our epilepsy revenue is around 80% in the U.S. and 20% OUS, driven by markets already offering strong patient access, higher DRE awareness, and advanced care infrastructure. Globally, our procedural mix is around 40% new patients and 60% replacements. This procedural risk and geographical mix offers both durable growth and strong profitability through new patient adoption and continuity of care for those patients already benefiting from VNS therapy. Given the contribution of replacements, I want to take a moment to discuss replacement rates. Approximately 70% of our patients currently receive a replacement implant when their initial battery reaches end of service. We have seen this rate steadily improve over recent years. Replacement rates then significantly increase for patients on their second, third, and subsequent generators. What does this mean for replacement volumes?
Our latest model shows that they have stabilized and are growing after the temporary COVID dip. Turning to the future, we will deliver value by leveraging three key pillars. First, compelling clinical evidence. Second, innovation. Third, commercial execution. Firstly, by sharing our latest and most comprehensive evidence on VNS therapy, we aim to drive greater adoption, empowering clinicians to prescribe and patients to choose VNS therapy earlier and more frequently. Our publication and education initiatives around the Core VNS data in 2026 are expected to shift perceptions and drive further VNS adoption. Secondly, we will launch meaningful innovation, starting with a new digital health platform, delivering greater convenience and deeper insights into a patient's disease journey. We expect more patients and clinicians to opt for our Bluetooth-enabled IPG that enables remote programming. This innovation will ultimately improve patient outcomes and physician experience with VNS therapy.
Finally, we'll execute with commercial excellence, expanding market access and reimbursement for VNS Therapy globally and increasing the rate of reimplantation for those already receiving therapy. We'll drive professional awareness and also patient awareness experience. Over the next five years, we expect our plans to deliver mid-single-digit revenue, low-single-digit global replacement implants, and mid-to-high-single-digit global new patient implants. With the remainder of the growth coming from price increases and a positive mix shift towards our Bluetooth-enabled IPG towards the latter part of our long-range plan. Additionally, we expect over 200 basis points of operating margin expansion. Now, let's explore each of these pillars in more detail. Our clinical evidence has evolved tremendously over the last 30 years. With our new Core VNS study, we are redefining a new reference point for outcomes for VNS. We've harnessed a closed-loop heart rate biomarker to deliver more timely, responsive therapy.
We have introduced features like day and night programming to personalize therapy and gain deeper insights into optimizing stimulation parameters and dosing. All these advancements have led to the superior outcomes seen in our recently published large real-world dataset, Core VNS, with nearly 800 patients over 16 countries in more than 60 sites. This contemporary evidence is really reshaping the perceptions of VNS effectiveness. It is prompting many clinicians to reevaluate where VNS fits within their treatment algorithm and consider using it earlier. Let's hear from Dr. Arjune Sen, who is the CEO at the Global Epilepsy Center and was our PI for our Core VNS study.
In terms of the results from Core VNS, to me, the main findings are firstly that VNS therapy can have a significant impact on seizures very early. Core VNS shows that you can reduce seizures by three months after implantation. Whereas traditionally, people have said that actually with neuromodulation treatments and VNS, you might need to wait a year or two years. A year or two years is a long time for everyone. If you're having uncontrolled seizures, that's a huge amount of time to wait to see benefits. Core shows that the benefit occurs early. Core also analyzed different seizure types. Not all seizures are equal. You can have a sensation, an unusual sensation, a sensation where you lose memory for a period of time or an unusual experience or an isolated jerk. Those can all be seizures. You can also have seizures where you may fall to the ground or you may hurt yourself or your body may shake and you can bite your tongue and sustain injury.
Core VNS has shown for those really difficult seizures, those dangerous seizures, it has a very profound impact and that impact persists. As everyone will anticipate, it's those dangerous seizures that tend to associate with the most risk, not just of injury, not just injury including head injury, but risk of mortality as well. If Core VNS can show that we can make a positive impact early across seizure types and that impact can be sustained, and in particular, if we can impact the really dangerous seizure types, that's got to be good for people with epilepsy. It's not saying that VNS is the treatment for everybody, and that wouldn't be the case for any treatment.
You have to at least open that dialogue and enable patients to understand the options about VNS so they can consider it and they can consider it early in their pathway because we all know the sooner you get control of seizures, the better the outcomes, not just in terms of seizure profile, not just in terms of mortality and risk of injury, but in terms of socioeconomic change. People can get back into employment. People can start to drive if they become seizure-free. If they're younger in education, then they can have a better educational experience. All of these things are vital to improving the care of people with epilepsy. In terms of when to implant VNS for patients with drug-resistant epilepsy, I think there is being a shift worldwide. Core is going to contribute to that as well.
We're seeing, for example, that people are trying fewer anti-seizure medications now than they did perhaps 10 years ago before being considered for VNS. The key thing is to emphasize the access to care to enable the discussions about VNS to be held early. VNS is a treatment that does not have neuropsychiatric side effects. It is not going to interact with other anti-seizure medications. It's now shown to have very good efficacy, particularly against difficult seizure types. It's about having those conversations early.
You can really see the passion that Professor Sen has around the data for Core and the potential that it has to change the outcomes for patients suffering with DRE. He also touches on access, which is a center point to our second lever for growth, which is innovation. In 2026, we will launch our clinician portal.
This will allow HCPs to access all of their patient information and practice dynamics from our state-of-the-art cloud-based platform, streamlining workflows and gaining immediate access to existing patient insight. In 2027, we will launch our next-generation device, our Bluetooth pulse generator that will seamlessly integrate between our patient and caregiver app and our clinician portal, removing a known barrier to care, which is enabling remote programming, with clinicians able to deliver care in the comfort of a patient's own home. This is a real game changer for the many patients who need support with their care. This will reduce the in-person commitment, making life easier for patients and caregivers. I am truly excited about the impact that it will have.
Next, we will empower patients through a patient companion app and provide personalized therapy control, monitoring, and key alerts for key events that happen, particularly at night when the risk is higher. Finally, in the long term, our goal is to increase the positive impact and the value of more personalized therapy through further biomarker data aggregation with potential application in areas such as seizure forecasting. This roadmap will deliver more value for VNS patients in three ways. Firstly, it will improve access and enable more patients to move beyond drugs towards VNS therapy. Second, it will simplify the patient pathway, enabling data-driven decision-making for therapy adjustments in the comfort of the patient's own home. Lastly, it will deliver improved outcomes so that each patient gets VNS therapy sooner. The last component of our innovation strategy is external innovation.
As the company with the largest channel and scale in the epilepsy space, we will evaluate token M&A opportunities for promising technologies that will help address the treatment gap. There is a significant unmet need in the space, many of which we can address through our organic patient pipeline. That being said, we recognize that we cannot address all these needs just with VNS. Given our leading commercial channel, we have the opportunity to bring new external innovation and have more impact on patients and create additional value for shareholders. I've been here for almost 15 years, and I am truly energized. We have the right team in place focused on the right commercial initiatives. Firstly, our commercial resources are strategically organized. Our key account managers focus on our comprehensive epilepsy centers, whilst our territory managers engage with the broader community to facilitate referrals.
Those of you that have followed us for a while will appreciate the evolution of our channel approach being appropriately sized for efficiency and focus. This channel is a platform for potentially onboarding therapeutic solutions in epilepsy. Partnership programs with leading epilepsy centers such as Project DREAM help hospitals streamline their epilepsy care pathways, identifying bottlenecks and improving access. Second, we've upped our capabilities and our relentless focus, expanding global access to VNS. We welcome CMS's decision to move replacement procedures to the Level 5 APC code, potentially increasing reimbursement by 48%. You might ask, "This is great, Stef, so what's the impact?" This will fundamentally improve the hospital economics over the lifetime of care. Remember, 70% of our cases in the U.S. are EOS. I believe that this will have a positive impact on overall penetration.
We are still actively pursuing Level 6 APC classification for new patient implants. Beyond the U.S., we are investing to improve access in many countries in the APAC and Latin American regions. Lastly, we continue to invest in both professional education and patient groups to ensure that all DRE patients know their treatment options and physicians are aware of the latest evidence supporting VNS therapy. We expect these efforts to drive further adoption of therapy with new patients, but also ensuring that those already benefiting from VNS therapy get access to our latest innovation. In terms of how these initiatives are driving financial value, the epilepsy business will deliver consistent, profitable growth over the next five years. We expect to deliver mid-single-digit revenue growth, maintaining our attractive gross margins and expanding income margins over time.
Through prudent and targeted R&D investments, we expect to achieve a 60% freshness index by 2030, paving the way for future digital health products that serve as the basis for further growth and to help patients lead better lives. As a wrap-up for LivaNova and over epilepsy, we have a proven therapy that will deliver sustainable growth in a market with significant unmet medical need. With several levers for growth, we will continue to provide industry-leading profitability whilst reinvesting in innovation to sustain future growth. Let me leave you with this. We believe in the future of this market and our unique position within it and the significant benefits that we can have for patients and treating physicians. Thank you. With that, I'm going to hand the stage to Dr. Ahmet Tezel.
He brings experience from the innovation community, having led the previously largest R&D organization in medtech. His impact here at LivaNova is already felt. His passion for innovation is infectious. I'm incredibly privileged to call him a colleague. Ahmet, come on up.
Next, I would like to provide an update on our strategy for difficult-to-treat depression, or DTD. We are now actively engaging with CMS as they move towards a decision based on recovery trial results. As a reminder, the recovery trial was co-developed with and co-funded by CMS under the Coverage with Evidence Development Program. In May, we initiated the process with CMS to seek national Medicare coverage for VNS therapy. As we wait for the outcome from CMS, we wanted to give you an overview of why VNS therapy remains a differentiated treatment option for DTD.
I will also share some brief thoughts on how a positive CMS decision could impact our financial outlook. DTD is aligned with our core Neuromod capabilities. As a strategic upside, it is not embedded within the guidance we are providing today. Today, I will talk about three topics. First, the unmet need, then findings from the recovery trial, and finally, upcoming actions with CMS. Now, to start our DTD discussion, we must start with the broader concept of major depressive disorder, or MDD. MDD is a mood disorder characterized by persistent sadness and loss of interest, and it affects about 34 million adults in the U.S. alone. Roughly one out of every three people with MDD qualify as DTD because they do not respond to medications. They do not achieve a response. The response is not sustained, or the treatment is not well tolerated.
This is termed difficult-to-treat depression, also known as treatment-resistant depression, or TRD. Due to this failure of standard treatments, DTD patients continue to have significant challenges that result in high unmet medical needs. Among this population, goals of treatment shift from remission to striving for best possible symptom control, reducing relapse, and optimizing psychosocial functioning. Patients with DTD face severe illness, poor quality of life, and high risk of death, highlighting the urgent need for better treatments. They often struggle with serious health issues like anxiety, personality disorders, or suicidal thoughts. The severity of their condition is a burden on the health system. These patients are twice as likely to be hospitalized, have more outpatient visits, and use a lot more medication. DTD is also a financial burden. Patients with DTD account for an uneven share of 40% of the total annual cost of MDD in the U.S.
To give you some context as to why treating DTD is so challenging, I'm going to share some data with you. In the early 2000s, the National Institute of Mental Health sponsored a landmark study called the STAR*D study. It was a very large study, including over 4,000 outpatients with MDD who were studied to understand how well antidepressant treatments worked in real-world settings. 63% of patients did not respond to the first medication. The study showed that treating depression usually takes several steps. As you can see from this figure, each extra drug treatment lowered the chance of being a responder. Even after four treatment attempts, 33% of patients still did not respond. These patients are the ones that qualify as difficult-to-treat depression. Additionally, as patients went through these steps, both medication intolerance and relapse rates increased. The study is a proof that DTD patients do not achieve response or remission.
They do not sustain a response or remission, and they do not tolerate the treatments that they're prescribed. The concept of that STAR*D study introduced that patients can get better, but they cannot stay better. The study documented the response rates of each treatment offset. The second column shows the same patients when they were observed at 12 months. A much smaller percentage of these patients remained well. For example, if you look at the top row, 37% of patients responded to the first drug, but out of those patients, only 70% of them retained the benefit at 12 months. That means that at the end of 12 months, about 26% was still a responder. One in three initially responded, but one in four was still a responder at 12 months. Even for patients who respond to treatment, long-term benefit is uncommon.
Pharmaceuticals offer only about one in four chance of sustained improvement. Further evidence of this lack of sustained benefit can be seen with ECT, or electroconvulsive therapy. ECT remains the gold standard intervention for patients with DTD. Even there, 50% of patients experience relapse within one year, meaning that even for the gold standard, patients may get better, but they do not stay better. By the time patients do not respond to four or five treatments, they often seek the care of interventional psychiatrists. Other than VNS, for this group of patients, there are three primary interventional treatments prescribed by interventional psychiatrists. The treatments are TMS, which is transcranial magnetic stimulation, ECT, and SPRAVATO, which is esketamine. I would like to take a minute to describe these three options, and then we will discuss VNS. TMS is a non-invasive treatment that uses magnets to stimulate the brain.
It has few side effects but requires up to 30 sessions over six weeks, and up to 60% of patients relapse within six months. ECT sends electric currents through the brain to cause a seizure. It works well for severe cases but isn't long-lasting. Half of the patients relapse within six months. It can also cause memory loss and needs general anesthesia, usually done in a hospital over 6-12 sessions. SPRAVATO is a fast-acting nasal spray treatment, but it can cause dissociation, making people feel detached or dreamy. Patients need to be monitored for two hours after each dose. It starts with twice-weekly treatments, then shifts to once every two weeks. Relapse rates are similar to TMS and ECT. In aggregate, these three current interventional therapies are received by more than 100,000 patients per year in this fast-growing segment despite short-term benefit, high relapse rates, and burdensome administration.
As I mentioned, current treatments for difficult-to-treat depression often fail to keep patients well long-term. Clinicians and patients want solutions that can provide consistent relief over several years. Treatments like that could reduce the need for continuous treatments and improve long-term quality of life. In this context, vagus nerve stimulation has been generating renewed interest from psychiatrists. Unlike some fast-acting treatments that fade quickly, VNS offers sustained improvement over years. Studies show that VNS offers lasting symptom relief, improves daily life, and is generally very well tolerated. Now let's talk about the most recent study on VNS therapy. The RECOVER study is the biggest of its kind, involving the most severely depressed patients ever studied. It was co-sponsored by CMS through their CED program.
While the primary endpoint of the RECOVER trial did not reach statistical significance, the data revealed that the treatment arm performed as expected in this severely ill population. As I will discuss, three facts drove our decision to pursue reimbursement. First, the compelling evidence of clinically meaningful and equally important sustained benefits. Second, the favorable safety and tolerability profile. Finally, the large unmet need with no real alternatives for this population. Over the past year, we've published seven manuscripts documenting critical data and how it may benefit patients with difficult-to-treat depression. There are four key takeaways from the RECOVER study that I would like to share with you. First, the patient population was severely ill. In fact, the average baseline depression score based on the MATTRS rating scale was the highest ever for a randomized controlled trial.
These patients had already failed 13 different treatment options on average, and 70% of them had already tried at least one interventional therapy. 40% of the patients in the study attempted suicide at least once in their lives. Second, the primary endpoint for symptom reduction was improvement in MATTRS score at 12 months. As I noted earlier, while the endpoint did not achieve statistical significance due to a greater-than-expected placebo response, there were clear signals of clinically meaningful benefit, especially in how long patients experienced partial response defined as 30% improvement. Third, RECOVER also measured patients' psychosocial function in several rating scales. VNS was superior to control in terms of improvement of quality of life. The differences observed were both statistically significant and clinically meaningful. The fourth key finding from the RECOVER trial was that VNS therapy kept patients well over time.
After 24 months, more than 80% of patients maintained improvements in symptoms, daily function, and quality of life, compared to 50% with ECT at one year. VNS shows the strongest long-term results ever seen in difficult-to-treat depression. Beyond clinical evidence, we have also seen validation from payers. Highmark, a leading Blue Cross Blue Shield plan, recently began covering VNS under defined criteria. We believe this decision reflects both the strong clinical value of VNS and the economic burden DTD places on the healthcare system. If we now look at the size of the market, there are approximately 34 million adults in the U.S. who suffer from major depressive disorder. Of these, about one-third of the treated patients, or 4.6 million, can be characterized as DTD patients since they have failed four or more depression treatments.
This includes interventional therapies and is aligned with the inclusion criteria for both the RECOVER trial and our FDA label. Based on our market research, we believe approximately 1.2 million of these patients would be strong candidates for VNS therapy. For every 1% penetration into that cohort, we would expect $400 million-$500 million in revenue from the U.S. alone. Due to the ongoing CMS process, we have not included any DTD benefit in the financial targets we are discussing today. We also acknowledge that the criteria of coverage is not finalized with CMS. Regardless, as these numbers outline, DTD represents significant potential upside for LivaNova. With its unique durability of benefit, VNS could become the new standard of care for DTD, creating a meaningful revenue opportunity in a large and under-penetrated market.
This category has significant unmet need, and if CMS grants coverage, we see a credible path to building a business with a sizable revenue base. As for the CMS process, we remain on track with the timeline we have discussed this year. CMS has reviewed the initial data and asked follow-up questions, which we have answered in preparation for a formal request. The timeline is flexible, but once the formal request is submitted, CMS will review it, then release a draft decision for a 30-day public comment period. After that, they will publish a final decision within 60 days, and coverage will begin right away. While we don't know when CMS will make their final decision, we believe this timeline provides a rough outline of the major upcoming milestones.
If successful with CMS and coverage is granted, LivaNova would be well-positioned due to our existing capabilities to both accelerate growth and limit dilution. Let me walk you through those capabilities now. First, we already have a small commercial infrastructure established for DTD. The sales and marketing team has been in place since the inception of the RECOVER study, even though we have scaled it down while we focused our efforts on CMS submission. They were focused on recruiting patients into the study, and they continue to work with physicians on the appeals process for patients with private insurance who are identified as good candidates for VNS. Second, we can control the level and rate of investment related to launch. We will have to further scale to target interventional psychiatrists and to educate the broader medical community.
We believe that we can do this over time as these patients' needs are substantially unmet by less effective, less durable alternatives in the market today. Third, this opportunity allows for a very targeted launch. We will specifically target interventional psychiatrists, starting with the participating RECOVER centers, as well as other high-volume interventional psychiatry centers. These centers are also concentrated in geographies across the U.S. Should we get the green light from CMS, this will be a focused, payer-driven adoption curve and not a broad, speculative rollout. Lastly, due to our core capabilities with the epilepsy business, a scaled DTD launch will be able to recognize organizational synergies and accelerate growth. While there will be a dedicated sales organization, functions such as commercial operations, R&D, market access, and other infrastructure will be shared with epilepsy, negating the need to build additional new capabilities.
Importantly, our existing capabilities also give us confidence in building a scaled, durable DTD business with a large revenue base. Our neuromodulation expertise, proven manufacturing capabilities, and established commercial infrastructure provide a strong foundation for success. They position us to move quickly and efficiently if CMS grants coverage. Taken together, DTD is not just a theoretical upside. We have a credible path to a business with significant revenue potential and attractive margins at scale. To quickly review some key points from DTD, there is a large and growing unmet need in the treatment of patients with difficult-to-treat depression. Many therapies can get patients better for a short time, but they often cannot keep patients better. Our vision is to be the durable therapy of choice in combination with pharmaceuticals, as VNS has meaningful benefits towards symptoms, daily function, and quality of life.
Pending successful outcomes from our CMS submission, we have an ability to scale our current DTD commercial capabilities and directly utilize R&D and manufacturing footprint of our epilepsy business, generating significant cost synergies. While this is not embedded in today's long-range financial targets, DTD is a strategic extension of our Neuromod platform and will create meaningful value if CMS coverage is secured. This is a focused, risk-guided effort in an area where LivaNova has clinical learnings, deep neuromodulation expertise, and platform leverage. Thank you for your attention. Now, that's all for depression. We're going to go into a break, and then I'm going to come back and talk to you guys about obstructive sleep apnea. I think our break is about 15 minutes. Thank you.
We're going to take a 20-minute break, so be back here promptly in 20 minutes, please. We'll have a countdown clock. Thank you.
Okay, everyone, we're about to get started with Ahmet Tezel, and he's going to talk to us more about OSA. Yep.
Okay. Thank you. Whoever initiated that, thank you. Good morning again. Obstructive sleep apnea, or OSA, affects 10% of the adult population and, unfortunately, one in 10 people in this room. That's about 23 million adults in the U.S. experiencing 40 or more breathing interruptions nightly. Today, I would like to walk you through our strategy on OSA and why we believe this represents a compelling and de-risked opportunity for LivaNova. Before I talk about how LivaNova plans to seize this opportunity, I want to start with a little bit of a background. OSA is recognized as the most prevalent sleep-related disorder. It is characterized by recurrent episodes of complete or partial upper airway obstruction. This results in diminished or even absent breathing during sleep.
The disease is widespread and poses a substantial economic health burden. Currently, only about 20% of individuals with OSA receive a diagnosis, and this is improving as awareness increases and the use of GLP-1s enables more diagnosis. Unmanaged OSA is associated with significant complications: everything from hypertension to heart disease to COPD and asthma. First-line therapies such as CPAP do benefit about two-thirds of patients. Despite its efficacy, CPAP therapy does present challenges. These could include discomfort and disruption to sleep, which in return results in up to 50% of patients stopping CPAP after a period of time. Among patients who do not respond to first-line therapies, approximately one-third have access to only a limited range of treatment options, with less than 10% receiving hypoglossal nerve stimulation.
The limited adoption of this approach is attributed to factors such as high BMI, disease severity, and the presence of complete concentric collapse, or CCC. These barriers underscore a considerable unmet need within this medical area. This sizable and expanding patient population requires more comprehensive and effective therapeutic solutions. Given these market dynamics, the demand for effective second-line therapies will only increase over the next decade. In the coming slides, I will outline how we are providing a differentiated value by giving patients and physicians a distinct alternative. Let's look at the market and the current penetration of hypoglossal nerve stimulation. Out of about 23 million Americans with moderate to severe OSA, 80% are undiagnosed. Of the 5 million who are diagnosed, they usually start with CPAP as first-line therapy. However, many patients cannot tolerate CPAP due to discomfort, machine noise, anxiety, or issues with portability.
In the past, these patients had few alternatives beyond oral appliances or positional therapy. With the emergence of GLP-1 as another first-line therapy, the role of CPAP will most certainly evolve, and I will address this in coming slides. If we focus on the role of HNS, over the past decade, only 100,000, or less than 5% of eligible patients, have received this therapy. Given these low penetration rates, there's a large pool of moderate to severe OSA patients who are in need of alternative therapies. Now, if we focus on the right side of the slide, key growth drivers for the HNS OSA market include rising awareness and diagnosis, persistent CPAP non-adherence, and obesity epidemic. The final one is the aging population. These are all acting as strong positive catalysts.
This will sustain annual growth rates in the high teens as the market expands from its current size of about $1 billion. When we look at the care pathway, many patients with moderate to severe OSA go undiagnosed due to lack of awareness, denial, or fear of treatment, such as spending a night in a sleep lab or using CPAP. Those who are diagnosed usually start with CPAP, but up to 50% drop within the first year. At this point, they may be referred to an ENT for HNS or surgery, but fewer than 10% qualify for HNS due to criteria like high BMI, AHI severity, or having complete concentric collapse, leaving many high-need patients without effective options. Physicians hesitate to recommend HNS for these challenging patients because current technologies show suboptimal results, in addition to label restrictions for CCC.
As a result, current HNS solutions have been challenged to establish themselves as a true second-line therapy, creating a clear need for new solutions that overcome these limitations. There's an additional dynamic contributing to the current low conversion rate of 10%. The current direct-to-consumer campaign in this category funnels patients to ENTs despite being uninformed that HNS is a surgery with an actual implant. We continue to hear from our physicians that many patients coming from the DTC funnel associate HNS with a remote device versus an implant, and therefore, they prefer first-line therapies like CPAP during their initial consultation. This substantially impacts conversion rates. Next, the OSA care pathway is also continuing to evolve quickly with GLP-1 drugs. They have impacted OSA diagnosis, improving the effectiveness of CPAP by lowering BMI and starting to become first-line therapy on their own.
Also, access to GLP-1s for weight loss often depends on additional diagnoses, such as OSA or diabetes, making them a natural selection over CPAP for many patients. As of today, it is still premature to fully evaluate the long-term effects of GLP-1 drugs. However, this therapy is emerging as a significant first-line and adjunct option with potential to expand the OSA market. While the GLP-1s are broadening both treatment approaches and market reach, they're unlikely to replace existing therapies. There are three main reasons for this. First, approximately one-third of patients are unable to tolerate them. Second, you have to be on the drug indefinitely to maintain weight loss. Third, you have to be obese to be prescribed a GLP-1 for OSA. Many OSA patients actually have a normal BMI. These three facts underscore the continued necessity for alternative second-line treatments, such as proximal hypoglossal nerve stimulation.
Recently, I had a chance to ask Dr. Malhotra, who is our principal investigator from the OSPREY trial, for his thoughts on how the broader OSA pathway is evolving over the next few years. Please note that Dr. Malhotra was also the primary investigator from the GLP-1 or Zepbound trial in the U.S . Can we please play the video?
I was heavily involved in the SURMOUNT-OSA study as the PI, and I get that question a lot: Is sleep apnea going to go away? I argued just the opposite. We estimate about a billion people out there with obstructive sleep apnea. That number is going up, not down, despite these GLP-1 receptor agonists. I think one in four Americans has taken a GLP-1 receptor agonist.
Despite that, we just published a few weeks ago in The Lancet Respiratory Increases in Sleep Apnea Prevalence Over Time with or without GLP-1 receptor agonists. We included that in the model. The GLP-1s certainly have some impact in terms of sleep apnea prevalence, but the curves are going up, not down. There is more and more sleep apnea out there, particularly in women. There are more and more women that will have sleep apnea. We projected out to 2050 in a paper recently published in The Lancet Respiratory Medicine, and we are seeing more and more sleep apnea over there. I do not see it as a competition. There are plenty of patients. That number is increasing, not decreasing.
As I say, we're seeing patients who wouldn't have been surgical candidates who are now becoming surgical candidates because their BMIs are going from 45 to 32, and they're coming into a range where they now would be considered operable.
Okay. Having discussed the significant unmet need, I would like to pivot to how we plan to enter this space utilizing proximal HNS and the unique value our therapy provides. We're offering a new modality with proximal hypoglossal nerve stimulation that enables more complete control of the tongue and the airway. This gives healthcare providers the ability to treat a wide range of challenging patients, including about 30% of OSA patients in the general public that have complete concentric collapse. This requires a simple surgery, a battery that lasts 15 years, and a path to remote titration in the future.
LivaNova's existing in-house neuromodulation expertise in commercial R&D and manufacturing provides unlimited opportunities for synergy across functions. Up until now, I've outlined why OSA is a large opportunity where there are many patients who do not respond to first-line therapies and are in need for alternative treatment options. I also talked about our advantage with PHNS, highlighting its capacity to address needs of complex patients. These will be fueled by LivaNova's scale, experience, and expertise within the neuromodulation market. Collectively, these will allow us to be the preferred solution for patients looking for that second line of therapy while also establishing a secondary high-growth neuromodulation business. In return, this will generate significant value for both LivaNova and its stakeholders by launching the product by 2027, adding between $200 million-$400 million in incremental revenue by 2030, and breaking P&L even by 2029.
Now, I want to do a deeper analysis of our competitive advantages by briefly outlining the four key focus areas before addressing each one of them in greater detail. First, the technology. We're offering a novel modality in proximal HNS with a six-electrode architecture. This is supported by a comprehensive portfolio of existing IP. The six-electrode architecture allows us to stimulate broader muscle groups in the tongue and the airway. Second, I will present our clinical outcomes, which are validated by a gold standard randomized clinical trial. Our trial demonstrated effectiveness even among more challenging patients, along with a robust safety profile. Third, I will emphasize our innovation engine, which drives our entire portfolio. We will utilize our established expertise in R&D, manufacturing, regulatory, and clinical affairs within implantable neuromodulation technologies. Finally, we have in-house demand generation expertise and an established commercial operations process.
Referral generation is supported by the fact that 40% of top HNS accounts are existing LivaNova customers. Surgical advocacy expertise will also ensure we understand that critical perspective. Let's start with the first box on this slide: our differentiated technology. As I previously mentioned, proximal hypoglossal nerve stimulation allows increased control over the tongue and the airway movement. This enables for a variety of patients, including those with a high risk of complete concentric collapse. Please note that CCC patients, which are almost a third of OSA patients, are contraindicated for the market leader in this segment. PHNS uses six electrodes positioned on the proximal trunk of the nerve, which provides access to additional muscles affecting the tongue and the airway. This expanded level of control contributes to its effectiveness in treating a diverse group of patients.
PHNS delivers tonic or constant stimulation, which has been shown in trials to maintain benefits even if the therapies pause for two weeks, a feature not observed in first-generation technologies. The implantation procedure is less complex than first-generation HNS products due to the location of the nerve cuff, resulting in reduced surgery time. Now, transitioning to our robust clinical outcomes. We believe it's important to start with reviewing the design of our OSPREY trial and how it compares to the studies of first-generation devices. In contrast to these studies, OSPREY is a true randomized controlled trial with subjects randomized to stimulation or sham control all the way up to month seven, which was the primary endpoint. RCTs are the gold standard of clinical evidence, and we're proud to be bringing this level of scientific robustness to this space.
Additionally, other studies required a pre-operative drug-induced sleep endoscopy, or DISE, to screen out patients with CCC. However, this was not required for OSPREY , and these patients were not excluded from our study. We believe this means the population of OSPREY is even more representative of the real-world patients. Similarly, OSPREY enrolled patients with higher mean AHI and BMI at baseline compared to other pivotal studies, representing a more challenging patient population. Note that AHI is the Apnea-Hypopnea Index, which directly measures the severity of the disease. I would like Dr. Malhotra to comment about the relevance of patient demographics prior to talking about the results.
Yeah, prior studies in this space were relatively limited. The prior paper in The New England Journal of 2014, that 97% were white, they had a maximum BMI of 32 kg per meter squared.
They had relatively modest sleep apnea in terms of severity. One nice thing about OSPREY is it reflects the patients that I'm seeing in clinic. We had good diversity in terms of Hispanic and Latino people. We had a BMI up to 35 kg per meter squared rather than 32, as in the prior study. We had a range of severity of sleep apnea. The Apnea-Hypopnea Index, as our metric of sleep apnea severity, we had a good range of severity suggesting it can pertain to many of my patients. I also like the fact that we got rid of DISE because, as I say, patients don't like it, providers don't like it, and it's a waste of OR time in many people's views. Not having DISE, I think, is a good idea.
I want to emphasize the importance of the placebo group. In a controlled trial where you have active treatment versus no treatment, you can sort of look at those responder rates and see what they look like. In prior studies, they're just case series where you're doing pre versus post. The response rates become much harder to interpret. There are other secular trends that happen over time. People may be following diet or exercise instructions. Lots of things may be occurring during a pre-post design like that. Having a randomized controlled trial is a very important standard.
As we just said, the differences in patient demographics are critical when you look at the results with a responder rate of 65% after 12 months of therapy. This was achieved with about 45% of the study patients having high risk of CCC, which are considered the most difficult to treat.
In light of the study design and the patient population of OSPREY , these results demonstrate the strength of our six-electrode PHNS technology. Now, let's hear from Dr. Malhotra again about the results.
One of the things I feel strongly about is a randomized control design. What we did is we implanted everybody, and then we did two-to-one randomization where two-thirds got active treatment and assessed at month seven, and one-third had no active treatment. We are able to make comparisons in terms of response rates. If you just do a pre-post design, which is what was previously in the literature, it becomes very hard to interpret a response rate. By month seven, we are seeing a 58% response rate in the active treatment group versus 14% in the controls. The good news is there was improvement over time.
By month 13, that 58% was up to 65%, which is really quite favorable. The fact that it's improving over time rather than getting worse is really quite reassuring. We saw concomitant improvements in the functional outcome of sleep questionnaire and the Epworth Sleepiness Score and other really patient-centric factors. Improvement in patient-reported outcomes are hard to ignore in the context of objective improvements in sleep apnea severity.
If we go back to this slide, one of the key differentiators we have is our ability to utilize our broad neuromod innovation capabilities in our OSA program. One example will be utilizing the LivaNova Cloud Platform that Steph talked about during her presentation. Our strategy is to utilize the capabilities we developed originally for epilepsy also for our OSA technology.
Specifically, our strategy is to access the data from our devices to enable both the patient and the physician to track the progress of their therapy. As you heard in Steph's presentation, we have invested in a cloud-based digital health platform as an enabler. We will have digital portals for our physicians to remotely access their patient's device. Through the cloud platform, we're also creating a pathway for remote programming and improved patient engagement through mobile apps. Our digital capabilities will also improve physician workflows with data analytics and patient management while ultimately delivering optimal care for our patients. We now focus on the device itself. We have taken our clinically validated therapy and evolved it into a commercially ready product that redefines expectations in this space. One of the significant advancements is our rechargeable battery technology.
The implant is designed to last 15 years, well beyond others in the market. Thanks to the rechargeable system, battery life will no longer be a limiting factor. Having no battery restrictions gives us flexibility to develop new features without requiring early replacements. One specific example would be the ability to have frequent Bluetooth connection with the device for both the patient and the physician without being concerned with the high energy demands of Bluetooth. We have also designed the system to be MRI compatible with few exclusions. This makes it easier for patients to access imaging when needed without the complications associated with implantable devices. As I discussed in the previous slide, mobile technology is fully integrated into our solution to enhance both clinical workflows and patient experience through user-centric apps. Finally, our pipeline of upgrades supports secure remote over-the-air upgrades.
This allows us to continuously improve how we deliver the therapy. Altogether, we're confident our PHNS technology is being built for a scalable innovation in a rapidly evolving healthcare landscape. Before discussing our planned commercial strategy, I would like to talk about something that I'm really personally excited about. I would like to share some groundbreaking new clinical data that Vlad mentioned that provides evidence that we can help even more OSA patients. We have discussed the exceptionally strong clinical outcomes from the trial's 13-month endpoint, even while treating the most severe patients of any U.S. FDA trial, and without fully utilizing all six electrodes available on the device. Since we released the top line 13-month results with the latest patient data available to us, we have further advanced the titration algorithm by a new multi-contact therapy as it was originally intended.
This new proprietary Polysink technology enables the use of combinations of contacts, fully utilizing up to six electrodes, which unlocks additional benefits by optimizing therapy for each individual patient. Please note that Polysink was not available during the initial titrations of the OSPREY trial. So the month 13 data does not include Polysink. Polysink simultaneously combines electrodes in such a way that it provides a more targeted nerve activation. We believe and now have compelling initial clinical evidence that the greater control of this approach will enable an even greater patient response. To test our hypothesis, we invited all 35 patients who were non-responders through month 13 to return for the Polysink titration and a sleep study 30 days later to measure its impact. It is important to note that all non-responders at month 13 were invited, and therefore no patients were excluded.
Twenty-five patients who were non-responders in OSPREY through month 13 have agreed to these additional visits, and of these, 10 have now completed. Of those, eight out of 10 have become responders. In other words, Polysink has an 80% response rate in a population of previous non-responders. To level set, our 13-month OSPREY results without utilizing Polysink were already differentiated, producing about two-thirds responder rate. This is in line with other technologies despite enrolling the most severe population and not excluding difficult-to-treat CCC patients. The demonstrated ability of Polysink to convert non-responders into responders shows its potential to unlock unmatched efficacy in this space. Not only does that position us well against existing HNS therapies, but demonstrating effectiveness in an even broader group of patients could drive a step change in the market penetration of neuromodulation for treatment of OSA.
That is why we're incredibly excited about the results we're seeing so far from Polysink. We look forward to sharing additional data in the near future as we complete these 25 patients by the end of this year. To be clear, we intend to make Polysink immediately available during our commercial launch to ensure all of our patients have access to this advanced algorithm at their initial titration. This will not be used as a follow-up for non-responders. We will optimize therapy with Polysink for all patients from the start. In the last section, I want to focus more on the commercial aspects as we prepare to launch the product. We have established that OSA is a large-growing and underserved market with a clear and urgent unmet need for therapy that is effective, tolerable, and easy to integrate into existing care pathways.
We believe our differentiated PHNS therapy is the solution to that need. Now, let me talk about how we're going to bring this to the market. After a careful evaluation of partnership options, we have made a decision to commercialize OSA therapy independently. I would like to take a few minutes to walk you through why we're confident in this decision and believe this path offers the best return for shareholders. First, to level set on the market reality, the broad OSA market is fragmented. Most of the patient population is still being funneled into CPAP, and when that fails, patients often find themselves with no clear next steps. This is not just a product gap, but a commercial execution gap. The barrier of adoption in this space is not demand, but doctor awareness, procedural confidence, as well as patient access.
Whoever influences all these points, education and training in particular, will shape the trajectory of the market. With LivaNova's deep, decades-long neuromodulation expertise, we're well-positioned to do exactly that. We know how to commercialize therapies that require training and patient education and payer navigation. We have a successful track record of doing all three. Second, LivaNova's technological differentiation and compelling clinical data increased our confidence, including the initial Polysink results I walked you through earlier. Our confidence in the opportunity makes the concessions of a potential partnership less attractive. Third is the economics involved in OSA. By doing this ourselves, we retain full control over several key aspects critical to driving long-term value creation: pricing, margin, positioning, and customer relationships. Retaining commercial oversight allows us to minimize long-term dilution of economics. In summary, we believe we will unlock the most value by staying very close to our end user.
Now, let me share some key aspects of our commercial strategy. Our commercial strategy will be divided into two phases. For the first phase of the launch, we will focus exclusively on trial, getting as many as possible ENTs in academic centers, integrated delivery networks, and private practices to experience our device with their own patients. We want them to be confident our therapy can deliver successful outcomes in challenging patients they would not consider today. We have good reason to put our commercial resources into maximizing trial. We tested the value proposition in a quantitative research study with 150 ENTs and sleep specialists. 97% of ENTs said they would definitely or probably trial our device, a score that places our PHNS solution at the very top of the database of medical device concepts ever tested.
In the second phase, accelerated pace of the revenue ramp is a direct function of the trial established in year one, specifically the yield rate from trial to adoption, which reflects how the customer's experience compares to expectations. Here, we also have good reason to believe PHNS solution will perform favorably relative to customer expectations. For example, ENTs have told us that proximal placement of our electrode cuff makes for an easier and faster surgery that will allow them to get in more cases per day. Not having to perform DISE procedure further simplifies the workflow. OSPREY trial data shows that challenging patients who are not well served today achieve robust outcomes consistent with those with less severe disease. We have an advanced titration algorithm or Polysink test, which is already demonstrating significantly better response rates among most challenging patients that will further improve customer experience.
We have seen this type of growth acceleration in other successful neuromodulation launches where new entrants have strong value propositions and differentiated technologies relative to incumbent offerings. We believe these analogs provide a good benchmark for PHNS. As the commercial launch progresses, we will build a scaled commercial team, including a field-based team of clinical specialists that will titrate patients fully utilizing Polysink feature upon launch, and territory managers who will initiate trial programs in target accounts. During the trial phase, we will build upon foundational elements by an ongoing stream of publications, advisory boards, and presentations, trial programs designed to encourage ENTs to experience the results of PHNS in their own practices, and a comprehensive credentialing program for new implanting ENTs. Unlike other entrants in this space, we do not intend to invest in direct-to-consumer advertising, and we will not sell against CPAP.
Direct-to-consumer advertising in our industry has been shown to generate leads from unqualified patients, resulting in frustration for both the doctor and the patient. We are a second-line therapy, and we will focus on those who need a second-line solution. The OSA category can see consumer-facing noise, so a focus on channel efficiency matters. Our therapy requires targeted physician engagement and not mass market awareness at this stage. We will focus on educating the right physicians and activating the right centers. That's where adoption comes from, and that is where our capital will be going. We're prioritizing efficient referral-driven growth and not expansive brand building. This is aligned to our disciplined investment approach. Similarly, we will scale the commercial organization in a fiscally disciplined manner. We can do this without slowing down revenue growth because adoption of neurostimulation solutions typically lags trial by about three to six months.
Therefore, our commercial deployment will first focus on trial and credentialing effort. As revenue begins to shift from trial-driven to adoption-driven, the ratio of field clinical specialists to territory managers will increase. In the early years, territories will be less than 1.5 million, growing to about 2 million by year three. By 2030, we expect the ratio of field clinical specialists to territory managers to level out around a one-to-one ratio. We expect total territories to exceed 150 and the customer base of implanting ENTs to exceed 400. I will provide additional detail on the resulting OSA financial profile later in this presentation. Now, I would like to talk about how we support access for patients, payers, and providers. Unlike epilepsy and depression, we will be entering the market for HNS therapy as a third-to-market.
As such, we anticipate adopting existing coding guidance to expedite market access and provide early adopters with a clear path to reimbursement. Given existing confusion over established codes, we're working with relevant medical societies to ensure that coding guidance is clear at launch and the risk of denials is minimized. This partnership with these organizations helps ensure straightforward and HCP-friendly pathways. We will also have a robust health economic case for both payers and providers based on improved workflows and reduction in healthcare resource use. In addition, we're developing detailed analysis of the surgical workflows to understand the payer and provider economics. This analysis will consider the total episode costs to understand how PHNS can improve provider efficiency and minimize healthcare costs. Now, let's look at our product roadmap. This reflects a clear trajectory from connected devices to intelligent care.
We start with MRI conditional and Bluetooth-enabled devices, establishing the digital backbone for remote monitoring and therapy management. We then enable remote programming and data collection, expanding clinical reach and insight. As we advance, we significantly reduce the in-clinic titration burden through remote titration, streamlining workflows and improving efficiency. We then move into intelligent care, where automated titration powered by machine learning enhances both clinical precision and operational effectiveness. Each phase builds on the last, driving clinical impact and long-term value through purposeful innovation. It also allows us to continue to upgrade the platform with meaningful innovation for the next three to five years, almost on an annual basis, and very importantly, mostly through software upgrades. I want to now spend a couple of minutes on the key milestones coming up in the next couple of years.
We expect the PMA approval for the clinical trial device to be in the first half of next year. This was a modular PMA submission, and we're confident on the approval timing. We will follow the approval with a 180-day PMA supplement for the commercial MRI compatible device that will enable us to commence a limited market release in the first half of 2027. The full market release should begin about three months after the limited market release. The gap between the approval of the clinical trial device and the launch of the commercial device creates an opportunity for us to build a strong body of evidence and to promote and even train ENTs before approval of the commercial device. It opens the door for us to get a head start on what we know to be a six to nine-month adoption cycle.
Before we close on OSA, I want to cover one more topic: the financial profile of OSA for the next few years. As we've discussed throughout today's presentation, our differentiated technology, disciplined commercial strategy, and the ability to leverage LivaNova's neuromodulation expertise will enable us to achieve a highly attractive financial profile in OSA. To summarize, first, we expect to launch in 2027, first with a limited market release, which will set the stage for rapid adoption. Second, we expect to achieve break-even P&L by 2029, driven by a phased commercial rollout and efficiently scaling our field organization. Third, in 2030, we project between $200 million-$400 million in revenue, supported by strong market fundamentals, differentiated clinical outcomes, and targeted physician engagement. We expect continued revenue growth beyond the $200 million-$400 million range after 2030.
Fourth, we expect to deliver an 80+% gross margin profile in 2030, reflecting the economics of implantable neuromodulation therapies and our ability to leverage existing infrastructure. Finally, we anticipate an adjusted operating income margin of 25+% in 2030, underscoring the scalability and durability of this platform. Further margin improvement is expected in outer years. Taken together, these milestones demonstrate that OSA provides an opportunity to enter a large double-digit growth market with a clear pathway to attractive margins powered by LivaNova's proven neuromodulation expertise. Let me close on why we think we're uniquely positioned to win in OSA. The OSA market is large, growing, and under-penetrated. However, there remains a very real clinical need for broadly effective treatments for patients who require a second-line therapy, as many patients fail CPAP and GLP-1s.
PHENS is the next-generation neuromod technology shown to be effective in treating the most severe patient population in the most rigorous RCT done to date in this space. The OSA clinical community is very open to new technology choices, especially those supported by clinical evidence. Pending continuation of the exceptionally strong results from the Polysink algorithm, PHNS will become a new paradigm of clinical effectiveness within neuromodulation for OSA. We believe LivaNova has the scale, expertise, and experience to be successful in this market. OSA offers a de-risk growth platform through a clear path to commercialization, leveraging existing neuromod capabilities, including deep, decades-proven commercial expertise. In summary, PHNS will set a new standard of care for treatment of OSA and create significant shareholder value. Thank you, and now I will turn it over to Alex.
Alex has been with LivaNova since 2017 and has been our CFO since 2021. He has been an amazing partner for me since I joined the company as we worked together to upgrade our innovation capabilities. I've been very fortunate to work with a CFO who understands and prioritizes innovation. With that said, the stage is yours.
Thank you, Ahmet, and good afternoon, everyone. Throughout the day, my colleagues have defined who LivaNova is today and our vision for the future. From a financial perspective, I'd like to emphasize that today, LivaNova is a profitable cash-generating company with strong positions in two major segments: cardiopulmonary and epilepsy. We also have two unique neuromodulation platform assets that have the potential to drive growth and create value for years to come.
I believe that our focus on execution and innovation is what sets us apart and enables us to deliver significant shareholder value. Next, let's take a look at our historical performance and outlook for 2025. Since 2023, LivaNova has transformed, and our results show it. Whether it's our top or bottom line, our financial performance has improved dramatically and consistently. That was not always the case in the past. As Vlad noted earlier, our performance during this timeframe is closely correlated with strategic actions we took. These include streamlining our portfolio, refocusing on our core businesses, and driving disciplined execution across every function and region in the company. Please note that my comments regarding 2025 are in line with the guidance we issued on November 5th. For 2025, we expect organic revenue growth between 9.5%-10.5%. That is about a 10% CAGR over the last three years.
As you can see, I'm also sharing our adjusted operating income margin, which we haven't explicitly guided in the past. For 2025, we expect it to be between 20%-21%, which represents nearly 30% CAGR over the last three years. We expect adjusted diluted earnings per share between $3.80-$3.90 based on 55 million shares. That's a 17% three-year CAGR. Adjusted free cash flow from operations is expected to be $160 million -$180 million for 2025, a 30% CAGR over the last three years. Now, we've delivered strong results and are set to finish 2025 in a great position. Today, you've heard about our strategy and the bright future ahead. Allow me to round this out with the long-range financial prospects for the company. Before we begin with our five-year outlook, just a little bit of housekeeping.
When describing our CAGRs, our baseline period reflects the midpoint of our 2025 guidance ranges, as I just described. I also want to be extremely clear. Our long-range model does not include difficult-to-treat depression. If we get positive CMS coverage, it could be a significant upside for the company. As Ahmet shared, the U.S. DTD opportunity is significant. We estimate that every one percentage point of penetration represents $400 million -$500 million in revenue, with an epilepsy-like gross margin. In this long-range plan, we're treating DTD as pure upside. On the other hand, if coverage isn't granted, we will wind down the program and stop investments. As a point of reference, we're investing approximately $15 million in 2025. Let's jump in. Franco and Steph have provided insights into how our strong business, core business, contributes to value creation.
Starting with cardiopulmonary, we expect mid to high single-digit revenue CAGR through 2030, as we continue to innovate around the Essenz platform, increase manufacturing capacity for consumables, and launch our next-generation oxygenator technology. At the same time, we forecast CP operating margin expansion of more than 300 basis points. Moving across epilepsy, we project maintaining a mid-single-digit revenue CAGR through 2030, supported by impactful clinical evidence, improved reimbursement, strong commercial execution, and digital innovation. We're confident we can expand epilepsy operating margin by 200 basis points over this timeframe. Earlier, Ahmet outlined our go-to-market plans for obstructive sleep apnea. This is a very compelling opportunity. OSA will accelerate our growth and profitability in the long run, underpinned by our unique technology, robust clinical evidence, and fast-growing market that is ready for competition. Our full commercial launch will take place in the second half of 2027.
We will invest in building the necessary commercial infrastructure and new product innovation over the next several years to ensure our success. We expect to rapidly scale OSA revenue to approximately $200 million -$400 million, achieving an operating margin of 25% + by 2030. We're also modeling OSA break-even P&L by 2029. Now, we have analyzed this opportunity and assessed numerous scenarios. We've accounted for the evolving competitive landscape, including the impact of GLP-1s. We utilized very realistic market assumptions and the investment requirements in our modeling. We've studied analogs in other therapeutic categories, which informed our forecast. I want to emphasize that our $200 million -$400 million range does not represent our peak revenue expectations. The OSA business is a natural plug into our neuromodulation infrastructure, leveraging manufacturing, R&D, commercial, and back-office capabilities to accelerate time to value.
We recognize that delivering on this five-year plan requires a milestone-based investment strategy in the near term, aligned with market conditions. I'm confident we can execute within this framework. Let me acknowledge the $200 million range is a wide revenue range for OSA. To be clear, this range does not reflect our lack of conviction in the opportunity or the rigor of our forecast. It simply reflects a few variables that could impact outcomes in 2030. I'd like to talk about three of those. First, launch timing. While we don't anticipate a significant shift in timing, regulatory timelines are not entirely in our control. Even a modest adjustment, months, not years, can have an impact on 2030 revenue because of the shape of the uptake revenue curve. Importantly, this does not change the long-term opportunity or the underlying trajectory. It simply affects where we may land in 2030.
Second, Polysink outcomes. As Ahmet described, the current results only include 10 out of 35 patients. If Polysink continues to convert non-responders into responders, it could drive a step change in penetration. This would not only have a positive implication for 2030 revenue, but for sustained growth well beyond. Third, market growth. This is a market that has been growing approximately 20% over the last three years. We have taken a more prudent assumption in our modeling. To summarize, we have rigorously modeled the OSA opportunity using realistic market share assumptions and investment requirements, accounting for the evolving competitive landscape, including the impact of GLP-1s. While there are variables that could influence revenue, we believe the range we have provided reflects a balanced view of what LivaNova can achieve in OSA by 2030. Let's step back and look at what this means for the enterprise.
As you can see, there are essentially two phases to our strategic plan. Phase one reflects 2025-2028, where the core continues to drive mid to high single-digit revenue CAGR and margin expansion while we invest in scaling the OSA business. During this time, we're committed to maintaining an annual adjusted operating margin above 20%. We also forecast EPS growth in line with revenue growth. The second phase captures 2028-2030. During this phase, we expect OSA to begin to contribute meaningfully to enterprise margin expansion. As I stated, we expect OSA P&L to break even by 2029 and deliver a robust 25% + operating margin by 2030. This results in a compelling financial profile over the long-range plan from 2025 to 2030. We expect to deliver a high single-digit plus revenue CAGR, exiting with adjusted operating income margin in the mid to high 20s.
This model translates into a low double-digit to mid-teens EPS CAGR. In short, we're using the strength of our core to enter a high-growth, high-margin business while capitalizing on our neuromodulation capabilities. This strategy doesn't just deliver strong financial outcomes by 2030. It sets the foundation for sustainable, diversified growth and margin expansion for years to come. Next, let me walk you through the key drivers of our margin expansion plan. As you've seen, the cardiopulmonary and epilepsy units are very profitable, enabling us to drive strong financial performance while investing in critical infrastructure and innovation to sustain our growth. Let's walk across this bridge from left to right. Our gross margin will be driven by four key elements. One, Franco mentioned that we will drive cost out of Essenz and improve our manufacturing efficiencies in CP consumables.
Two, the CP portfolio will be enhanced by driving service and software revenue, which have attractive gross margin profiles. Three, we will continue to use price as a lever across both CP and Neuromod. Finally, our product mix will be skewed toward neuromodulation, which carries a higher gross margin. Next, in SG&A, we expect increased leverage from our fixed cost base. We have built a foundational infrastructure for scale and now expect our top-line growth to significantly outpace incremental investments. This is the way I think about it. As we stand up OSA, we will unlock significant efficiencies across LivaNova, from R&D to commercial operations to back-office functions. In addition, most go-to-market investments are front-loaded. As top-line scales, each incremental dollar of revenue carries higher profitability. This reinforces our path towards sustainable margin expansion.
Research and development ratio will continue to decline as clinical spend tapers off in OSA and DTD. We will also be able to gain efficiencies from our investments in our digital technology platform, especially as we launch new products. For those of you who have been following us for a while, you may recall that historically, LivaNova has not been a capital-intensive business. We have significantly stepped up our CapEx investments over the last two years. These investments support growth plans and drive long-term operational efficiencies. There are three major investment priorities. First, we're expanding our cardiopulmonary manufacturing capacity. This decision is grounded in our market share gains achieved over the last two years, and we expect that trend to continue. Second, we're upgrading our ERP system to a single global instance, S4, which will help us streamline operations, maximize manufacturing efficiency, and improve working capital across the business.
This implementation is already in flight, and we expect it to be completed by the end of 2028. Third, we have made substantial investments in innovation with our LivaNova digital health platform. This cloud-based platform will allow us to launch digitally enabled products and services that will contribute to growth. Now, what happens after that? As these big projects come to completion, our CapEx will normalize to historical rates. Let's shift our focus to cash generation. We expect to generate approximately $800 million-$900 million in free cash flow over our long-range plan, with an average conversion ratio of over 80%, putting us among the top of medtech peers. With profitable growth and normalized CapEx driving robust free cash flow, we're well-positioned to continue to reduce debt and invest in future growth through both organic initiatives and strategic M&A.
As a reminder, we expect to make the SNIA payment soon, which will reset our leverage ratio to approximately 1x EBITDA. In conclusion, we believe our plan is both balanced and achievable. We've thoughtfully assessed the risks and opportunities ahead and built contingencies to continue to deliver consistent value through a range of uncertainties. Next, let me walk you through our capital allocation framework and priorities in detail. Our capital allocation priorities reflect both our conviction in LivaNova's long-term growth potential and our disciplined approach to value creation. We're focused on putting capital to work where it generates the most optimal returns, and that starts with investing in our business. First, we're investing in our core platforms where we have a clear line of sight to value creation. These are proven and differentiated businesses with global demand, as you've heard today.
Second, we have a high conviction in the OSA market. We're taking a thoughtful and evidence-driven approach to invest in the commercialization of a differentiated technology. We believe that the potential growth and the profitability of OSA justifies our investment. Just as a reminder, our goal is to keep adjusted operating margins above 20% annually, even as we increase investments in OSA over the next three years. Our capital allocation strategy reflects a deliberate decision to reinvest capital into the business in a disciplined manner. This includes targeted investments in growth and innovation, which we believe solidifies LivaNova as a market leader in neuromodulation and cardiopulmonary. Ultimately, we believe the pipeline innovation is the path to durable returns for our shareholders over time. Also, we do not view innovation as an investment as a discretionary budget item, but as a core differentiator.
It is essential to maintain our leadership edge and continue to deliver competitively differentiated products to the market. Our investments are already yielding results. Just look at the recent Essenz performance. It is a clear example of our innovation investment paying off. Finally, we're evaluating select bolt-on M&A opportunities that can strengthen our core and meet clear strategic and financial hurdles. As you've heard from Phil today, while tuck-in acquisitions are part of our growth toolkit, we remain highly selective and targeted in our approach to them. We're prepared to move decisively on opportunities that will position LivaNova as a market leader and strengthen our core competencies. We're approaching M&A with clear guardrails in mind. Our bar for acquisitions is high, and every dollar of capital invested has to clear a strategic and financial hurdle.
Overall, our priority is to invest in high-growth areas to build a strong, more resilient business. We believe this approach will help us deliver sustainable value to our shareholders. As such, LivaNova does not have a committed share repurchase program. We're currently investing in a disciplined manner where we believe the returns are the highest, back into growth and innovation. That said, we regularly assess our capital allocation strategy and remain flexible and open to share repurchases in the future as our strategic priorities and financial strength and market conditions allow. Here's the bottom line. We're focused on building a stronger, more durable LivaNova, and our capital allocation framework is grounded in a commitment to generate long-term shareholder value. Before turning it over to Vlad for closing remarks, I'd like to leave you with the following key takeaways.
Our plan is expected to deliver steady revenue growth in the core with acceleration from OSA. CP growth will come from the Essenz replacement cycle, market share gains in consumables. Epilepsy offers a stable, profitable growth supported by commercial execution, clinical evidence, and better reimbursement, as well as digital technology. OSA will drive above-market growth as we scale up in a fast-growth market. Core business and OSA will support adjusted operating margins above 20%, even as we invest to scale the OSA business. All this should drive significant operating margin expansion and low double-digit to mid-teens EPS CAGR through 2030. I'm also confident that we will keep generating strong cash flows over time. With our disciplined capital allocation strategy, we're set to make a difference for patients, customers, employees, and shareholders.
In closing, I hope that I have provided clarity into our core businesses of Epilepsy and CP, as well as a transformative growth opportunity ahead with OSA. Let's also not forget the potential upside with DTD. We look forward to delivering on our commitments and creating shareholder value. Thank you for your time today. While Vlad makes his way back to the stage, I'd like to say that it's been a great 18 months since Vlad joined the company. Our vision under his leadership is taking shape, and I'm more excited about the future of this company than ever before. I appreciate your support and your interest in LivaNova. Thank you.
Thank you, Alex. Thank you for the kind words, and also thank you for doing this presentation in this very impressive booth. I'm still not clear whether it's a tool to help your injury or is it a fashion statement, but thank you. Before we open it up for Q&A, I want to thank all of you for joining us today, for being exceptional listeners. Many of you have followed LivaNova through several chapters of our history. In recent years, we've strengthened our market leadership positions in both cardiopulmonary and epilepsy. We streamlined our portfolio. We invested into innovation in a targeted way. These efforts paid off. LivaNova has delivered 10 out of 11 quarters of double-digit top-line growth. We improved our margins. We delivered free cash flow generation. As we look ahead, LivaNova is becoming a disciplined, growth-oriented medtech company. We sharpened our focus and rigorous plan for investment, where our differentiated right to win just clearly justifies it. We have the right team.
We have the right strategy and the discipline to execute effectively. This is what gives me great confidence in our path ahead. Our cardiopulmonary and epilepsy businesses together provide a stable, profitable foundation with mid-single-digit or better growth and an attractive margin profile. Our entry into OSA is de-risked, backed by compelling data and differentiated technology that addresses significant unmet needs and increases our portfolio growth. We are launching our OSA with disciplined execution, leveraging our proven neuromodulation infrastructure, avoiding costly direct-to-customer investments. The growing profitability of our core business will allow us to maintain annual adjusted operating margin above 20%, even while investing to scale OSA. OSA for us is a high-conviction opportunity that will accelerate our portfolio growth. Our strategy and operational drivers translate directly into financial value that support a low double-digit to mid-teens EPS CAGR through 2030.
Our DTD program, which I will remind you is not included in our targets, represents a pure upside. DTD would be a natural extension of our neuromodulation platform and a potential game changer pending a favorable CMS reimbursement decision. Our capital allocation priorities are disciplined and transparent, and we are committed to keeping our shareholders informed as we progress. In closing, I'm deeply confident in LivaNova's path forward. We're well-positioned for transformative growth and sustained value creation to our shareholders. I look forward to sharing this journey with you and celebrating our future success. Now, I'd like to invite my colleagues to join me on the stage for a Q&A session. Thank you.
Okay, as you can see, we have Vlad, Alex, Ahmet, and Phil on the stage for Q&A. If you have a question in the room, I ask that you raise your hand. I'll call on you. We have push-to-talk mics. Please press the button on the right once. It'll be on, and then you have to turn it off again by hitting it one more time. With that, we'll open the floor to questions. Anthony.
Thanks, Anthony from Zoom. Thanks for the presentation. Lots of great information, and great to see the new plan taking shape here. Maybe just for 2026, when we think about the near-term plan versus the long-term plan, it feels like, and I think the message is, a lot of the sleep buildout will begin in 2026. I'm thinking the way to think about adjusted operating margin for 2026 is essentially flattish, high single-digit growth rate for top line. Maybe is that a good place? I'll leave that there for 2026, and then I have a couple of follow-ups.
Appreciate your question, Anthony. This was a long-range plan presentation, and I think we provided a really nice framework for how to think about 2026. Right? If you look at the phase one of our plan, which is kind of the mid- to high single-digit revenue growth, right, and maintaining that 20% operating margin profile, right, and EPS growing in line with revenue, I think 2026 fits really nicely into that framework.
Fair enough. The follow-ups are on sleep. When you think about how you define the market, it's 20% to trail in three years. The leading player in the space, Inspire, just finished the quarter at about 10. What is baked in for how the market is actually going to play out over the next five years? When you think about getting the 25% after break-even, so break-even 29%, 25% margin, it feels like that midpoint $300 million is really back-end load. I just want to confirm, is that the way to think about it? Thanks.
Yeah, maybe I'll start with just to reframe why we're so optimistic about OSA. It starts with the market growth, right? It starts with this large market and significantly growing market. It gives us opportunity to get in there and build accelerated, sustainable, and more important profitable growth. As Ahmet shared and Alex shared, obviously, we have a range of assumptions in terms of our growth.
There are three key things that will influence where we're going to be on the range: how fast we get our approval, how differentiated our technology is going to be from clinical results, and the third one is going to be on the market growth. That will influence the phasing of our growth. Maybe, Ahmet, I don't know if you want to.
Yeah, I mean, for example, just to double-click on a couple of things. We are extremely excited about Polysink. If Polysink's success continues, the growth will be higher for us because it's going to expand the market even faster. We think it will impact the HNS market because the average responder rate is going to be in a new set of levels. It's the timing, it's the Polysink results, how strong they are.
We hope it continues the way it is and the underlying market conditioning. GLP-1s, we think by the time we're in market, it will settle a little bit more. Right now, as you know, the market leader talks about the impact it's making into the market. We think the fundamentals of GLP-1 are going to actually help the HGNS market because it increases diagnosis. There's a large patient population that cannot use it or is not on it indefinitely or has side effects or has a normal BMI. We think the overall impact of GLP-1 is going to help the market because it's also going to bring patients into the range where HGNS is going to be successful. As you know, we study the most severe patients.
We believe we're going to capture a higher proportion of the patients that are coming from the top of the funnel through GLP-1s.
Yeah. Maybe just one data point to add. We did our own market research, and of 150. What we're seeing very clearly in the data is that funnel is increasing. There are more patients being diagnosed. Those offices are busier. That top of the funnel is increasing. The net effect that Ahmet so well described in the presentation, we believe that'll flow through to a positive net effect on the bottom, especially as the normalization of GLP-1s in the care pathway over the next 12-18 months.
Thanks, Anthony. Mike Polark.
Thank you, Mike Polark with Wolfe Research. I have one on oxygenators and then one on sleep. On Oxys, I heard in 2030 you will have built capacity to be 60% of that market. I think the forecast, if I saw it correct, you get low 40% share. Can you bridge that for us? Is it conservatism? Why build to be 60% and only take low 40%?
Yeah, it's a great question. I'll start and please build up on this. Let me start with the fact that our momentum has been very strong. A couple of years ago, we started with low 30% market share. Today, we estimate it to be in high 30%. This is not a new market. This is a very consistent, very mature market. You rarely see analogs across medtech where, in a very mature market, you have such rapid share gains. Normally, it's either caused by disruptive innovation or some kind of disruption in the market.
In our case, this was caused by the fact that the market grew faster than the industry expected. We reacted better. We've created more capacity, and we've benefited from it. Moving forward, we have another variable coming into kind of our ability to capture market share, which Franco talked about, which is a new clinically differentiated oxygenator. The prudent approach we took is to say that the market share trend will continue. We made an assumption of 800 basis points in terms of market share gains over the next few years, driven by our ability to continue manufacturing more and launch of a new product. Now, this is a market where there are three major competitors now. One exited this market. This is also the market where it's not a nice-to-have procedure. It's a life-saving procedure.
There is also kind of a public health broad impact if products are not available in this market. We feel, A, it's our responsibility to make sure that we've built capacity to address the market needs. B, we want to make sure that in a situation where it's a mature market and we, in a way, positively surprised ourselves by gaining so much share over the last two years, that we can accelerate that share gain. It's a combination of our aspiration to grow faster, but also a prudent approach that we're taking in terms of planning forward.
Two parts on sleep. A lot of great information today. If you said this, I missed it. Pricing, how do you expect the price relative to Inspire? If I did the math correct on your 2030 vision for territories and implanters, 400 implanters, 150 territories, that's less than three implanters per territory. That's a higher touch than what's been developed to this point. Can you put that together for us? Yeah. Why not more docs per rep? Thank you.
Anyone take the first one?
Let me start off again. Our high conviction on the market opportunity, high growth, and our ability to gain share in this market is really driven by the clinical evidence, by the differentiated technology. Our go-to-market will evolve over time. We feel that our share assumptions are realistic in that sense, and we have the ability to continue to drive productivity over time.
Maybe I'll comment on that 150, 400 number real quick. What we found out is that the HGNS therapy is very concentrated. It's extremely concentrated. About two to three dozen centers cover more than 80% of implants. Our approach is go to those centers with our differentiated clinical data and focus on those versus going very broad when 80% is in very concentrated environments.
Maybe just specific to price. Obviously, not going to give a specific number today, but we want to make sure that that price reflects both the clinical value proposition that we described as well as the market conditions. We are currently doing work on that to refine our assumption on what price could be.
Thanks, Mike. Adam Maeder?
Hi, Adam Maeder, Piper Sandler. Two for me. I guess the first one is on sleep. Just wanted to see if you could share your expectations in terms of what the FDA label will actually look like. Do you expect to have an indication for complete concentric collapse, or is the expectation that you won't have any contraindication language in the label? The second part of the sleep question is just Polysink, really interesting feature of the technology. The initial data that you've shared is small numbers. Do you have a plan to kind of build upon the clinical evidence profile of Polysink? I had one follow-up. Thanks.
Yeah. I mean, in terms of the indication, there will be no contraindication because we didn't exclude them. There will be no contraindication. There will not be a warning. I mean, I can say that definitely, but there's no reason for a contraindication, no reason for a warning.
Now, we didn't specifically do a study to identify CCC patients and treat them. The indication statement will not say, and proven to work in CCC patients. It is just like we didn't exclude all females, where the indication statement wouldn't say only males. Our coverage statement is going to be moderate to severe OSA with the numbers from the study in terms of starting AHI, and it should have no contraindication, no warning for CCC. The Polysink question, yeah. What we did is that we generated that data within the FDA trial. It allowed us to do it in our agreed-upon protocol with FDA. That's why we did 35 patients, which were the non-responders. We invited all of them. Twenty-five of them said yes.
We will most certainly, once we launch the product, we will do registry studies because, as I mentioned, moving forward, that initial launch and onwards, we're going to use Polysink at the first titration. We want to generate a new data set out of 100 patients that are titrated originally with Polysink, what's the responder rate. That is why the answer will be absolutely we will do more studies, but we will launch with Polysink.
That is very clear. Thank you. For the follow-up, wanted to ask about the cardiopulmonary outlook in the LRP, mid-singles to high single-digit growth over the planning period. Can you maybe just bifurcate that between HLMs and Oxys? You talked about the Essenz replacement curve concluding in 2027, and you'll have some of the price mix benefits. Do Oxys and HLMs grow similar, or is there a scenario where Oxys could actually grow faster than HLM? Just any color there would be helpful. Yeah.
No, it's a great question. If you look over the past two years, growth has been relatively well-balanced between HLMs and Oxys. I would say the HLM growth has been accelerated versus our expectations, driven by the fact that customers saw a major value proposition from Essenz and selected fully system with full optionality. That obviously drove the price premium up. We are able to maintain that price premium so far. Moving forward, beyond 2026 and then 2027, there will still be a tailwind in terms of growth in HLM while somewhat slowing versus what we have today.
As this happens, we expect oxygenator growth to pick up not only because of our ability to continue to gain share through supply improvements, but also through a launch of new oxygenator. At this point, it's in a preclinical setting. Franco shared some of the clinical value, but we believe that versus anything on the market today, it is significantly differentiated in terms of clinical performance. Like I said, in a mature market, share can be gained through either some kind of other disruption or innovation disruption. We believe that this has some runway in terms of gaining significant share through innovation.
David?
David Rescott with Baird. Thanks for hosting this. Two questions, and I'll ask one and then a follow-up. The first on DTD, I know you provided the opportunity that's out there, and it's not included in the LRP. If it were to be, it would be, I think, a pretty substantial number, as you called out, on the top line. When we think about what that opportunity could look like on the bottom line, right, is that something where you should also still be able to sustain that minimum of 20% operating margins over the period? Can you help us think about that maybe curve of profit or adoption relative to the one that you laid out for OSA?
Yeah. First of all, as we saw, we see DTD as a potential major opportunity pending CMS approval. First, it is a significant market. Ahmet showed that we believe about 1.2 million patients in the U.S. alone can benefit from this technology. In that case, 1% of penetration into this market would equal about $400 million-$500 million market size.
That's a significant market opportunity. It is aligned with our strategic direction of getting into faster, bigger growth markets where we can also maintain a sustained high level of growth. Now, the difference with OSA here, obviously, there are no alternatives today for those patients. If we enter this market, we would be the first and the only player in this market space. That makes it very attractive. The market opportunity is large. If I go internally, inside LivaNova, today, we already have capabilities dedicated to DTD. Our commercial team is focused on depression only. We have neuromodulation capabilities that we can leverage across the entire organization with reimbursement, group, and health economics and regulatory R&D manufacturing. We can control the scaling up and scaling down of this capability relatively simple in a simple way.
Now, the opportunity itself, there are so many ranges. Obviously, if the approval does not happen, it is a very clear path. If the approval happens, then it depends what level of indication we are going to get. That really will kind of change or create various options for the market size and opportunity. We have a playbook for each of those different options in terms of market opportunity. As we see what happens with the CMS approval process, we will share the playbook. At this point, we are just treating it as a pure upside to our current plan.
On the M&A strategy, heard comments on that. If you think about the broader portfolio, you have got cardiopulmonary, you have got epilepsy. Within epilepsy, or sorry, neuromod. Within neuromod, you have got sleep, epilepsy, maybe depression. Can you help us think about where across the portfolio M&A would be a focus? Is it something that you would look to, again, leverage that neuromod type of business versus the specific call points within neuromod itself? Then help us maybe understand how either success of DTD or the pace of adoption in OSA influences the timing of the M&A strategy.
Yeah. Thank you for this question. I'll turn it over to Phil to talk about our strategy. Before we do that, I do want to focus on one thing that Phil talked about in his presentation. That is the capability that we've been building. We looked at our history. We've learned on some of our kind of journey from the past.
We really focused over the last 18 months on building internal capability that will allow us to execute whatever M&A strategy we have. Phil, coming into the organization with very rich and kind of extensive experience in M&A, we have a number of other leaders that joined us. We have reshaped our process and our culture so that when the opportunities come, we will be able to execute them well.
Yeah. I think in Alex's remarks, you heard the use of the word disciplined for M&A. What does discipline mean? To us, it means that we are laser-focused on aligning it to the strategic priorities, that we ensure that we can leverage kind of capabilities and the right to win, and that we are very disciplined in risk-adjusted returns for efficient use of capital.
While we've built the capability that Vlad described to kind of scour the landscape and make sure we're understanding kind of what's out there, the number of opportunities that are going to reach above that bar are few and far between. That does not mean that it is not going to continue to be an important focus for us with a focus on tuck-in M&A. The ability to leverage some of the core assets that we have in the organization today, like for example, in epilepsy, where you heard Steph describe the strong commercial channel and strong customer relationships that we've established over the last 30 years.
Thanks. Matt Taylor.
Thanks for taking the question. Matt Taylor from Jefferies. I just want to follow up on some of the sleep stuff. So understanding that the label may not have CCC on it, how much of that is going to be in your go-to-market strategy? Meaning, can you educate folks? Can you develop other data to show that your product stands out and convince some of the naysayers that because of the proximal aspect, etc., you can effectively treat those patients?
Yeah. I mean, what we will communicate very clearly is that in our OSPREY trial, 45% of the patient cohort was high-risk CCC patients. So there are predictor algorithms that you can predict it without dye study. We will make CCC a big part of our initial launch strategy. I think it's the overall data set, the high severity, high BMI, no exclusion of CCC makes the clinical data extremely valuable for physicians.
I think physicians do get the importance of triple C because, as Dr. Malhotra mentioned, it adds to the treatment pathway. It complicates the entire process. It adds a lot of time and cost. It is not very well reimbursed. To answer your question, it is going to be an important part of our story.
Maybe just want to follow up. I think investors are going to be encouraged to see that you are going to go to market with something MRI compatible and with less recharge burden. One of the other things I wanted to double-click on was the programming. It seems like you are making efforts to streamline that. How much can you automate that in the future? How easy can you make it to program? What impact will that have?
That is a great question. One of the advantages we have is that the investments we made in epilepsy for cloud connectivity, we can directly transfer to OSA. We can directly transfer to depression. Actually, we can also directly transfer it to CP. That is the beauty of having a single cloud system. That is in the strategy you described because ultimately, you do not want to bring patients in for a PSG. The limiting factor is measuring the impact of the titration. Connecting to the device is going to be easy. We already have the capability with epilepsy. We will have it with the device. You need to know when you titrate it, what is the impact. The way to get there is to measure the oxygen. Even integrating with rings and things like that enables you to do that.
If you looked at our strategy slide, that is the goal. The goal is to do in-home titration by measuring parameters like oxygen in the long run. It's less about the technology. It's more about measuring the effect like oxygen and developing algorithms that will enable the physician to say, "Okay, based on this, I'm going to titrate you to that." It's part of our strategy because we think that's going to even expand the market.
Matt, I think that we're laser-focused on building and upgrading our software and AI capabilities. If you haven't had a chance yet, I'm going to advertise a little bit, see the breakout room where the team can demonstrate our epilepsy technology. Our last software upgrade was done using AI.
I think we're in a leading group of med tech companies that will continue using AI as our kind of key capability to drive innovation.
Thanks, Matt. David Roman?
Thank you. David Roman from Goldman Sachs. Maybe just on the core neuromodulation business, one of the things that you had introduced probably about a year ago was an expectation that volumes would be flattish in 2025 and 2026. I think in the presentation today, you started talking about seeing a resumption of growth in the replacement market. Can you maybe just help us understand how that has unfolded? Are you seeing kind of a normalization of market growth here? As you look forward, can you maybe give us some sense of the geographic contributors to your mid-single-digit expectations for the neuromod business?
Let me take it from two dimensions. One is replacement and new patients, and then geographic expectations. Alex, please jump in onto this. What we have seen over the past few quarters and what we project moving forward is the replacement devices will continue to grow at low single-digit growth moving forward. We see that the post-COVID impact is going to be neutralized. Moving forward, like I said, we expect low single-digit growth from the replacement point of view. Now, that's 70% today of our revenue. On the new patients, we believe that the profile of our business will be mid to high single-digit, driven by commercial excellence, driven by all the innovation that Steph talked about. We're very excited about clinical evidence that came with the Core VNS study. That will contribute to the new products.
Now, the other important factor that is going to play into this model will be what happens with the reimbursement. Today, we have a high level of confidence that as of January 1st, on the replacement devices, reimbursement will go from level 4 to level 5. That will, over the lifetime of patients, create significant improvement into the economics of healthcare providers. We're working on level 6 for the new patients, and that will be an upside to our current plan. That is kind of where we expect low single-digit on replacement, mid to high single-digit on new patients. In terms of geographic mix, like Steph said, this is a very underpenetrated market. It's more underpenetrated outside of the U.S. We see more opportunity for growth outside of the U.S. just based on low level of penetration.
Maybe just a follow-up. As you kind of considered the risks and opportunities across the LRP, what are some of the factors that can contribute to achieving the LRP in a scenario where OSA comes in at or below the low end of the range that you're communicating here?
For me, there are two upsides to our plan that can contribute in a major way. One is, I talked about on the epilepsy side, it's a level 6 reimbursement. On the cardiopulmonary side, it's our ability to scale manufacturing faster than we expect. Those are the two big contributors. I think on OSA, at this point, we're in early stages. That is why we provided such a significant range that had some opportunity to go faster or to be at the lower end. At this point, it's very difficult to say.
Mike Matson?
Yeah. Thanks. Thanks. Mike Matson from Needham & Company. Just curious, and it sounds like your sleep salesforce is going to be more focused on the ENTs. How important are the sleep doctors in terms of influencing decision on which product gets used? Will you focus on that call point at all with that salesforce?
It's both, for sure. As I mentioned in my talk, one reason we wanted to not partner was because of the complexity of the pathway between the patient, the sleep specialist, and ENTs. Our focus is going to be to ensure that we connect with both and do that connection better than today in the market between the sleep specialist and the ENTs. Our focus is, yes, the final implanter is ENT, but we will have a strategy to connect with sleep specialists as well.
Yeah. Maybe the only thing to add to that is, I mean, we've done that in epilepsy already. When you think about the epileptologist to the neurosurgeon, that's a unique care pathway as well that we've helped shape as our leadership in epilepsy. That's going to be an analogous dynamic in OSA as well between sleep and ENT. Making sure we have presence in both will be important.
Okay. Got it. Just in terms of the break-even assumptions with sleep apnea, what are your assumptions on gross margin? I'm sure you're not going to give me numbers, but is that going to ramp pretty meaningfully? I mean, I imagine you already have the plant. You're already producing the epilepsy products. I can't imagine that there's a lot of fixed cost issue there or overhead issue. We had thought maybe it would be more break-even potentially earlier because the gross margins are so high. Maybe that's what I was missing is that the gross margin has to ramp over time as well.
That's a great question, Mike. The beauty of standing up OSA inside LivaNova is being able to leverage this foundational infrastructure that we have for Neuromod. We see a very attractive gross margin profile. I think you mentioned it in your it's going to be 80+%. At scale, it's going to take a little bit of time to get there. It gives us tremendous leverage right out of the gate. The build-out of the commercial channel is going to take some time, right, and then ramping revenue. We do see 2029 as a realistic time frame for this business to break even. Could it happen sooner? Maybe. Time will tell.
Just to clarify, the gross margin, do you expect it to be materially lower than that 80% in the first few years? Or is it going to be fairly close to that and sort of stable over that time frame?
I mean, it may start slightly below the 80% threshold, but we see it ramping to that level rather quickly.
Thank you. We're just about time for Q&A. One more. Go ahead, Matt.
Hi. Thanks. Just one follow-up on margins and just on the comment you made on gross margins. If you think about the sort of impact of these investments on the total operating margin and the trajectory you laid out, is it fair to say that gross margins will be a little bit of a lesser impact, middle of the P&L, SG&A a little bit of a heavier impact?
If you could, understanding you have laid out a time frame for break-even for OSA, is that sort of a wedge into the P&L over the next couple of years? Are you growing reps and resources in the middle of the P&L kind of proportionately with the commercial opportunity? Do you get a sense of what the weight looks like next year, the year after, and then before you get to break-even?
Let me take the gross margin impact from an enterprise perspective first. The biggest gross margin expansion opportunity for us comes in the cardiopulmonary business, right? Just continuing to take cost out of the capital equipment platform, continuing to drive efficiencies in consumables, scaling volume there to drive higher levels of absorption, and continuing to use price as a lever to drive gross margin expansion.
I think Franco mentioned it in his presentation that is an area that we're going to continue to focus on to drive gross margin expansion. As we think about Neuromod, epilepsy has a very high gross margin today. So there's probably lesser opportunity. Again, we're excited about the OSA gross margin opportunity because it's actually accretive to the overall gross margin profile.
Okay.
As far as the balance of the P&L, I think, again, this is where I get excited about driving leverage in the foundational infrastructure that we've built so far, right? Being able to plug in a business like OSA or DTD into that infrastructure to drive leverage and continue to expand margins that way. Probably get too excited about that.
Thank you. I'll turn it to Vlad.
Thank you. Listen, I want to end where I started by saying thank you. First of all, I do want to say thank you to the LivaNova team who made today possible, Briana, the entire IR team, all the presenters, the executive leadership team that's here, and all the colleagues around the world. Their hard work is reflected in the results that we were able to deliver over the last couple of years. More importantly, our confidence in our future comes from the confidence in the team across the world. I want to start by saying thank you to them. I want to thank all of you for being here today, for engaging during the day, but more importantly, for your ongoing partnership and interest in LivaNova. Thank you very much. With that, that concludes our 2025 Investor Day. Thank you.
Thank you, everyone. As a reminder, the product showcase is open for about an hour. Vlad talked about the digital health platform that you can see. It's interactive. It's really cool. We have our Essenz system out there for you to check out. We also have our Next-Generation Oxygenator, as well as our OSA team and DTD, and also Core VNS. I would highly encourage everyone to go check that out. Lunch will be on the second floor in the Ambassador Room. Thank you.